UK overall trade deficit narrowed from £2.1bn in December to £0.6bn in January. (Data released on Thursday.) About one third of this narrowing reflected an improvement in the trade in oil deficit on the back of the recent fall in oil prices.Capital Economics notes in a report on Thursday:
- However, while exporters initially offset the impact of the rise in the pound on volumes by cutting their sterling prices, their scope to do this further is now fairly limited as a result of sterling’s recent appreciation.
- And with the economic recovery set to be fuelled by strong growth in consumer spending this year, it remains more likely that imports will grow at a faster rate than exports.
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