UK current account deficit likely to fall

The pleasing aspect of the UK's recent external performance is that the trade deficit has fallen to its lowest reading since 2000 (0.7% of GDP). However, despite this pleasantly surprising development, the current account deficit is still excessively large as net property income from abroad has collapsed. 

The reason is that the UK is outperforming Europe in terms of rate of return which is attracting investment flows. The income on these investments then flowsabroad. 

"This situation is unlikely to change materially any time soon so we should not expect a radical improvement in the current account deficit in this week's release. It is predicted that the deficit will fall from £26.5bn in Q1 to £23.4bn in Q2, purely because of a narrowing of the trade deficit", says Societe Generale.