(RTTNews) - UK’s visible trade deficit surged to an eight-month high in September on car imports that was stimulated by government’s car scrappage scheme.

According to a report published by the Office for National Statistics, the deficit on trade in goods increased to GBP 7.2 billion in September from GBP 6.1 billion in August. The deficit stood well above the consensus forecast for a GBP 6.1 billion shortfall. The ONS revised the shortfall for August from the originally published GBP 6.2 billion deficit. Exports rose 3.9% month-on-month or GBP 0.7 billion to GBP 19.4 billion and imports grew 7.5% or GBP 1.9 billion to GBP 26.6 billion.

At the same time, total trade deficit stood at GBP 3.5 billion compared to a revised GBP 2.2 billion shortfall in the prior month. The August figure was revised from the GBP 2.3 billion deficit. Meanwhile, the surplus on trade in services was GBP 3.7 billion in September, smaller than the GBP 3.9 billion in August.

In September, the deficit on trade in goods with non-EU countries widened by GBP 0.7 billion to GBP 3.8 billion. There was a fall in exports of chemicals, while imports of oil and aircraft reported increases. And, the visible trade deficit with EU nations increased GBP 0.4 billion to GBP 3.4 billion. Imports of cars, intermediate goods and chemicals from EU countries showed increases in September.

The ONS said both export and import prices of goods increased 1.1% in September compared with August. Excluding oil and erratic items, the seasonally adjusted volume of exports dropped 0.2%, but the volume of imports was 4.1% higher in September, compared with August.

In the third quarter, total trade deficit amounted to GBP 8.4 billion, smaller than the GBP 8.6 billion in the prior quarter. Also, the visible trade deficit narrowed to GBP 19.8 billion from GBP 19.9 billion in the second quarter.

Exports and imports of cars in the third quarter showed relatively large increase compared to the second quarter. Exports and imports of cars were at relatively low levels in the second quarter. These increases may be linked to higher demand widely attributed to the introduction of car scrappage schemes in the UK and EU more generally, the ONS said.

Further, oil imports moved up in the third quarter due to the increased refinery demand at a time when indigenous production was lower and as the UK continental shelf summer maintenance weather window extended into September.

Commenting on the trade figures, David Kern, chief economist at the British Chambers to Commerce said, while rising imports may indicate higher domestic economic activity in the final weeks of the third quarter, Britain’s overall trading performance is still disappointing. Kern added that sterling is still very competitive and signs of growth in the Eurozone provide opportunities for British exporters. The government needs to do everything in its power to enable British exporters to trade effectively, said Kern.

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