Roundup: British trade deficit widens, might drag GDP growth

British deficit on trade in goods and services was estimated to have been 2.9 billion pounds (4.3 billion U.S. dollars) in February 2015, substantially widening from the previous month's 1.5 billion pounds, said Office for National Statistics (ONS) Thursday.

Experts here reckon that the trade deficit was wider than expected, and the quarterly data might indicate that the next export could not contribute positively to Britain's domestic gross products (GDP) growth in the first quarter.

RECORD DEFICIT

Britain registered a 10.3 billion pounds deficit on goods trade, and an estimated surplus of 7.5 billion pounds on services in February, data showed.

The widening of trade deficit between January and February 2015 mainly reflects a fall in exports of goods to non-EU countries, particularly to the United States, said ONS.

In terms of commodities, the main decreases were in the exports of miscellaneous manufactures, material manufactures and chemical manufactures, noted ONS.

In the three months to February, the total trade deficit narrowed by 0.4 billion to 6.5 billion pounds, reflecting an increase in goods exported to countries outside the European Union.

Over the same period, the trade in goods deficit between Britain and countries within the EU reached a record high of 21.1 billion pounds, figures also showed.

DEFICIT RISK

Paul Hollingsworth, UK Economist at Capital Economics, said in a note that "February's trade deficit came in worse than expected and will re-ignite fears that the strong pound and weakness in demand in the euro-zone is acting a straightjacket on exports."

He noted that the net exports might "struggle" to make a positive contribution to British GDP growth in the first quarter of 2015, after boosting it by 0.8 percent in the fourth quarter of 2014.

Martin Beck, senior economic adviser to the EY ITEM Club, a London-based economic forecaster, said: "With the trade deficit widening to a five-month high, February's release is disappointing, despite an encouraging run of data over the last few months."

"It seems that both exports and imports are growing at a decent pace, but net trade is unlikely to have much of an impact in either direction on GDP growth in the first quarter," he added.

Earlier this week, the Bank of England (BoE), British central bank, warned that Britain's record current account deficit, wider term measuring a country's foreign economic activities, could trigger "deterioration in market sentiment" towards the country if its economic recovery falters. (1 pound = 1.49 U.S. dollars) Endit