U.K. trade deficit narrows in Q1, net trade to contribute significantly to GDP growth in coming quarters

Trade in goods deficit in the U.K. deteriorated against expectations in March to GBP 12.3 billion from a revised GBP 10.4 billion in the prior month. However, the total U.K. deficit narrowed by GBP 700 million to GBP 6.9 billion in the three months to March. Imports came in weaker with goods volume falling 0.3 percent three-month-on-three month. That was mainly down to lower imports from non-EU nations of items like ships and aircraft, which tend to be erratic, and as such this might be unlikely to be sustained, noted Daiwa Capital Market Research in a report.

The developments in imports clouded weak goods exports volumes that rose just 0.1 percent. This came in spite of goods export prices rising only 0.1 percent, the slowest pace since last June and might reflect the recent weakness in demand in key export markets, both in Europe and beyond.

In all, developments in terms of export and import volumes signified that net trade added 0.1 percentage point to the first quarter GDP growth.

“And there still seems little reason to expect a significant improvement in the UK's export performance - or indeed a substantive positive contribution from net trade to GDP growth - in coming quarters”, added Daiwa Capital Market Research.

At 21:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at -28.6117, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 51.8326. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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