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UK trade deficit reduces as exports rise

While trade deficit figures for May were significantly worse than expected there was a welcome rebound in June with the trade deficit dropping to just over £7.4 billion from a high of £8 billion in May. The unexpected increase in exports is directly as a result of the relatively weak UK currency although it has taken some time for this particular factor to impact the trade figures. So what does this mean for the future?

While the total trade deficit, which also includes services, fell from just over £3.8 billion to a 22 month low of £3.26 million, demand in the UK for domestic products and domestic services is set to fall. Everywhere you look today there are negative comments regarding the UK economy, the UK property market, the employment market and the reduction in the public sector budget. Against this background it's difficult to see any short-term improvement in the trade deficit although further weakness in sterling could well see an increase in exports, at least in the short term.

While today's trade deficit data will be a welcome relief to many, there are still underlying fears about the UK economy and the strength of the potential revival.

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