UK goods trade deficit stable as exports to non-EU countries rebound

LONDON (Reuters) - Britain’s goods trade deficit stayed largely unchanged in March despite a rebound in exports to countries outside the European Union as overall import values

also grew to a record level, data showed on Tuesday.

The Office for National Statistics said the goods trade deficit inched down to 8.56 billion pounds in March from 8.59 billion pounds in February. Economists had forecast a gap of 8. 40 billion pounds.

The goods trade deficit with non-EU countries fell more to 4.11 billion pounds from 4.87 billion pounds in February and against forecasts for a gap of 4.65 billion pounds.

Both overall goods exports and imports values hit a record high in March. Export growth was driven by sales of pharmaceuticals and cars to non-EU countries such as the United States

and China, but also to Germany.

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Britain’s economy slipped back into recession in the first quarter of 2012, and surveys from the manufacturing sector showed a steep decline in export orders in April, mainly due to slower demand from the euro zone.

The increase in import values was driven by higher imports of oil. Import prices of goods rose by 1.2 percent on the back of higher oil prices.

The escalation of the euro zone debt crisis together with a rise in the pound has stoked fears that overseas demand for British goods will weaken, making an economic recovery harder.

However, Germany posted unexpectedly strong growth in the first quarter, though the currency bloc as a whole is still in danger of recession.

With Britain’s government’s hands tied by its pledge to erase a huge budget deficit, the onus to boost the economy is on the Bank of England.

However, last week the central bankers halted their quantitative easing programme of buying government bonds with newly created money, having purchased 325 billion pounds in bonds, as they worry inflation may not fall as fast as they hoped.