UK trade deficit shrinks more than expected in June

LONDON (REUTERS) - The deficit in Britain's trade in goods narrowed more than expected in June to its lowest level in nearly a year as exports picked up, giving a boost to hopes for a broader economic recovery.

The Office for National Statistics (ONS) also said on Friday that construction output grew more in the second quarter than first thought but said the increase had no impact, to one decimal place, on its estimate for economic growth in the period.

Britain's goods trade deficit shrank to 8.082 billion pounds (S$15.85 billion) from 8.668 billion pounds in May. Economists had forecast a gap of 8.50 billion pounds.

The goods trade deficit with non-EU countries narrowed to 2.646 billion pounds in June from 4.019 billion pounds in May and against forecasts for a shortfall of 3.8 billion pounds.

Including Britain's surplus in trade-in services, the overall trade deficit narrowed to 1.548 billion pounds, the lowest since January.

The monthly figures tend to be volatile, but over the three months to June, volumes of exports were up 5.9 per cent, almost twice as fast as growth in imports.

The latest data makes it more or less likely that net trade was a drag on quarterly economic growth in the second quarter of 2013, having lopped 0.1 percentage points off GDP growth in the first quarter.

A survey of purchasing managers in the manufacturing sector published last week pointed to a pickup in July in demand for exports of British goods.

Recession in the euro zone has hurt British exporters but there have been signs recently of a modest return to growth.

In its separate release of construction data, the ONS said output in the sector rose 1.4 per cent in the second quarter, more than the 0.9 per cent rise assumed in preliminary gross domestic product calculations.

The ONS also reported seasonally adjusted construction figures for June, which showed output was down 0.7 per cent on the month and was 1.9 per cent higher than a year earlier.

The ONS said it had changed the methodology for the monthly construction figures which were now calculated using the same base comparison as the quarterly data.

Prospects for the construction sector have picked up sharply in recent months. Activity jumped in July to hit its highest level in over three years, a survey of purchasing managers showed last week.

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