UK Trade Balance Decreases in October with Exports Up and Imports Down

Foreign trade developments are always interesting in the UK, since it is involved in so many different kinds of activities: manufacturing, shipping, insurance and oil, to name a few. In October, the balance on goods and services decreased by £1 billion to £2.9 billion as exports rose and imports fell from September amounts. The balance on fuel returned to a near neutral position after reaching unprecedented deficits in August and September. The balance on services was steady, reestablishing its old trend after a plunge in August due to Hurricane Katrina.

Among exports, manufactured goods maintained a firm trend for a third month, breaking a prior wide seesaw pattern. The value of crude oil exports surpassed £2 billion for the first time, ironically even as oil prices actually fell slightly from September; the volume of crude shipped surged more than 33% after sagging in August and September.

On the import side, widespread decreases in manufactured goods contributed to a £681 million decline in total goods imports. Vehicles were down £158 million and other finished goods £256 million, the latter a second successive decrease that basically offset a jump in August. Oil imports also fell, with both a volume decrease and a slight drop in the unit value.

Insurance payments figured heavily in an earlier swing in the trade balance. According to the ONS, Lloyds of London paid out an estimated £1.4 billion in benefits for Hurricane Katrina losses. The last time such a large negative flow (a negative export of services provided by a UK entity, not to be confused with an import of services, which would be provided by a foreign entity) occurred was in September 2001, and that was considerably more, at about £2.3 billion. Both of these were one-time payments, so the broad service export total quickly reversed to its then-current amounts. The overall balance on services had thus been a mere £457 million in August, but rebounded quickly to £1.7 billion in September and was basically unchanged in October.