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Gloomy exports forecast after trade deficit narrows

THE UK's trade deficit has narrowed to £2.7 billion in September, having been at £4.3bn in August.

However, economists warned the improvement was likely to be temporary with exports predicted to weaken in the coming months.

Vicky Redwood, chief UK economist at Capital Economics, said: "The UK trade position improved in September, but the trade balance has been pretty volatile recently and the underlying picture is one of little improvement."

Data from the Office for National Statistics showed a deficit of £8.4bn on goods was partially offset by the estimated £5.7bn surplus on services.

The narrowing of the gap was helped by a rise in overall export values and a 3% drop in total imports. The goods deficit with EU countries narrowed by £600 million to £4.4bn, helped by a 3.5% fall in imports.

With non-EU nations there was a £1bn decline in the goods deficit to £4bn with exports increasing £300m, or 2.4%, while imports decreased by £700m, or 4.3%. The US retained its place as the largest export destination followed by Germany, the Netherlands, France and Ireland. The greatest value of imports came from Germany, with China second, the Netherlands third and the US and France making up the rest of the top five.

The UK's best performing export sector was chemicals which booked a £358m rise between August and September.

Chris Williamson, from Markit, said: "The UK's trade deficit narrowed in September due to rising exports and falling imports.

"The data add to the view that the economy enjoyed something of a bumper third quarter, during which GDP is estimated to have risen 1.0%.

"However, survey data suggest the improvement will prove short-lived, with weak demand in struggling regions causing exports to have weakened at the start of the fourth quarter."

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