July 10, 2003	Thursday	Jumadi-ul-Awwal 9,1424

LONDON, July 9: Britain’s global goods trade deficit unexpectedly widened to 4.1 billion pounds in May as exports dropped while imports rose sharply, official data showed on Wednesday.

The Office for National Statistics said the deficit compared to an upwardly-revised figure of £3.37 billion for April and was much worse than the average 3bn pound deficit forecast by City economists.

It also announced hefty upward revisions to EU import data back to 1999 because it has now included an estimate for the value of fraudulent imports, mainly of mobile phones and computer parts, on which value-added tax has not been paid.

The ONS said global goods exports fell by 1.4 per cent to 15.2 billion pounds in May, the worst score so far this year. Imports, by contrast, jumped nearly three per cent to 19.3 billion.

The figures show that the fall in the value of the pound against the euro earlier this year has had little positive effect on the country’s trade position.

Indeed, the trade balance with the rest of the European Union, most of which uses the single currency, slumped to 2 billion pounds, the worst figure since last November, with exports to the bloc down 2.6 per cent to just 8.3 billion, the lowest total in almost four years.

That shows that in spite of the weaker pound, the lack of demand in core euro zone economies means that appetite for British goods remains poor in spite of their lower price.

And with the pound having rebounded by four per cent against the euro in the past month alone, the outlook remains bleak.

“These are bad numbers. Sterling weakness during that period obviously had had little material impact in improving trade performance. It seems that weakness in eurozone growth is continuing to limit the trade performance of the UK,” said Adam Chester, economist at Halifax bank.

The non-EU trade deficit also widened, to £2.1 billion in May from 1.4 billion in April. Exports were flat but imports leapt eight per cent to 9 billion pounds, the highest total for a year.

Financial markets showed little reaction to the data, however, with the FTSE 100 share index little changed on the day and the pound steady at $1.631 and 69.5 pence to the euro.

The ONS said it had made substantial revisions to back data to take account of initial adjustments for the impact of imports which have missed Value-Added Tax payments in intra-community (MTIC) fraud.—Reuters