* Goods trade deficit widens unexpectedly in June
* Exports weaken as sterling strengthens
* Construction output rebounds in June
(Adds economist reaction, detail)
By Andy Bruce
LONDON, Aug 8 Sagging exports pushed Britain's
trade deficit to a five-month high in June, suggesting a more
balanced economic recovery still looks a way off, although the
construction industry recovered from a dip in May.
Exports of British goods to countries outside the European
Union fell to their lowest level since September 2011,
coinciding with the pound hitting a near six-year high against
The country's total goods trade deficit grew to 9.4 billion
pounds ($15.8 billion) in June, its highest level since January,
from 9.2 billion pounds in May, official data showed on Friday.
Economists had forecast a gap of 8.8 billion pounds.
The data dampened hopes that exports will soon make a
greater contribution to Britain's consumption-led economic
recovery, but separate construction data and a recruitment
survey still pointed to strong domestic demand.
"The (trade) problem is largely out of the UK's hands," said
Martin Beck, senior economic advisor to the EY ITEM Club, who
pointed to weak growth in the euro zone - Britain's biggest
"This is likely to remain the case for the foreseeable
future. Sterling rose further in July while the euro zone
economy looks set for little or no growth in Q2."
By contrast, Britain's economy grew 0.8 percent in the
second quarter, according to an early estimate.
The Bank of England - which will release updated economic
forecasts next Wednesday - expects that pace of growth to slow
slightly later this year.
The pound hit an eight-week low against the dollar after
Friday's data, pressured mostly by news that the United States
had authorised air strikes against militants in Iraq.
Including Britain's surplus in trade in services, the
overall trade deficit rose to 2.5 billion pounds from 2.4
billion pounds, also the biggest since January, the Office for
National Statistics (ONS) said.
Exports of goods decreased in June by 0.4 billion pounds,
reflecting falls in oil and manufactured goods. Imports also
declined, but only by 0.1 billion pounds.
Construction data from ONS added to survey evidence that
house building has surged recently, as its monthly measure of
new housing hit its highest levels since the series began in
Overall construction output - which accounts for just over 6
percent of the British economy - rose by 1.2 percent in June
after falling by the same percentage in May. Year-on-year growth
rose to a three-month high of 5.3 percent from 3.9 percent in
Still, construction output is 10.3 percent below its level
in the first quarter of 2008, before the financial crisis.
"We expect (the improvement) to continue, particularly as
the housing market now seems to be shaking off the effects of
tougher mortgage rules, with loan approvals rising 8 percent in
June," said Rob Wood, economist at Berenberg.
A Markit purchasing managers' survey showed house building
rose last month at the fastest rate since November 2003,
although overall growth in construction cooled slightly.
The ONS revised up its earlier estimate of construction
output in the second quarter to show no change, compared with a
0.5 percent decline previously.
The revision would have no impact on its 0.8 percent
estimate of GDP growth during the same period, the ONS said.
A survey of recruitment companies on Friday also pointed to
strong domestic demand, as British businesses stepped up hiring
last month and continued to offer higher starting salaries.
(Additional reporting by Costas Pitas; Editing by Susan Fenton)