UK trade gap narrows on strong US demand

Britain narrowly avoided a new record international goods trade deficit in 2003 as flagging demand from the EU was outstripped by robust demand from the giant United States economy, official data showed on Tuesday.
But the overall deficit in goods and services hit a record as traditional British strengths such as banking and insurance did less than usual to redress the balance.
A smaller-than-expected December trade gap of 4.16 billion pounds brought the full-year goods deficit to 46.4 billion pounds, just shy of 2002's high of 46.6 billion, which was the widest since records began in 1697.
While the trade surplus with the US rose in 2003 to a record 6.2 billion pounds from 3.3 billion the year before, the deficit with the EU widened last year to a record 23.8 billion pounds, the Office for National Statistics said.
That raised concerns that the deficit trend will likely remain negative as the probability of a slowdown in the US far outweighs a potential surge in demand in Germany and the rest of the eurozone, where the majority of British exports go.
"The danger is that US growth will slow and that the rise in the pound against the dollar by four percent since January will hamper further growth in exports to this area," said Jonathan Loynes of Capital Economics.
"Unless domestic demand in the eurozone improves soon, the narrowing in the trade deficit seen today may not be sustained in 2004," he said.
Such a sharp contrast between trade with the US and the eurozone came despite moves in currency markets that would tend to favour the opposite. The pound has rallied 16 percent against the dollar since the end of 2002 and shows no signs of abating.
The ONS said the total deficit, which includes both goods and services like banking and insurance, widened to a record in 2003, to 35.8 billion.
The 2003 oil trade surplus shrank to 4.4 billion, the lowest since 1998 when it was 3.0 billion pounds. And the surplus for services of 10.6 billion pounds was the lowest since 1996, when it was 10.3 billion pounds.
Exports in December to Britain's biggest single country trading partner, the United States, which is leading the global upturn in growth, rose by 350 million pounds to 2.65 billion although imports from America fell slightly.
The December surplus with the US rose to a record 856 million pounds in spite of the dollar hitting 11-year lows against sterling.