UK trade deficit narrows in May

The UK’s trade in goods deficit was narrower than expected in May, but the better performance was marred by a sharp upward revision of April’s shortfall, data released on Tuesday showed.
The Office for National Statistics said that the nation’s trade in goods was in the red by £6.3bn in May, the smallest gap since October 2005.
Exports climbed by 3.5 per cent to £18.2bn, reflecting higher sales of chemicals and precious stones. Imports fell by a fraction to £24.5bn as the UK had less demand for fuels and oil.
After adding the £2.8bn surplus on trade in services, the total balance of trade was £3.5bn.
However, the numbers for April saw significant revision. The trade in goods deficit widened from £6.3bn to £6.9bn because the original report had overestimated exports to the European Union, particularly for trading in the types of goods associated with VAT fraud which in the past has included mobile phones and computer chips. This took the total balance of trade for April to a deficit of £4.2bn.
Peter Newland at Lehman Brothers noted that the report showed that import price inflation had rebounded and that this “may increase concerns among policymakers that the deflationary impact of globalisation is starting to ebb”.
“Strong activity means that the focus for the majority of policymakers will likely remain on the outlook for inflation; the rise in import price pressures in May is a hawkish development in this regard,” he added.