That’s one deficit that’s been reduced

The UK’s trade deficit narrowed in March to £2.74bn from £2.95bn in February. The goods deficit fell just slightly to £8.56bn from £8.59bn, but the services surplus rose more substantially to £5.83bn from £5.64bn.

So was this a sign of the UK economy’s relative weakness holding back the demand for imports? Or was it a sign of a recovering export sector, especially in services?

And what of the coming months? What will be the effect of a growing crisis in the eurozone on (a) the sterling exchange rate, (b) the rate of economic growth outside the UK and (c) UK economic growth? And what will be the effect of these on the demand for imports and exports and on the trade balance? The following articles examine the issues.

(For a PowerPoint of the above chart, click on the following link: Balance of trade)

Articles
UK goods trade deficit stable as exports to non-EU countries rebound Reuters (15/5/12)
UK trade deficit narrows in March to £2.7bn BBC News (15/5/12)
Exports close UK trade deficit Guardian (15/5/12)
First trade surplus in cars since 1976 The Telegraph, Emma Rowley (15/5/12)
UK trade deficit narrows in March Fresh Business Thinking, Marcus Leach (15/5/12)

ONS Release
UK Trade, March 2012 ONS Release (15/5/12)

Questions