The UK visible trade balance improved markedly in October to -£7.6bn, from a revised -£10.2bn (BarCap -£9.5bn; consensus -£9.4bn). The improvement was driven by an increase in exports to a record £26.5bn from £24.4bn, and a fall in imports to £34.1bn from September's record £34.6bn.

Notwithstanding fears of the euro area's problems hitting UK trade, the UK goods trade balance with the euro area improved by more than £1.2bn to -£2.0bn, with exports increasing by £0.7bn to £12.3bn. The goods trade deficit with the EU as a whole and with non-EU countries also narrowed.
 
Stripping out price effects, goods exports grew in volume terms by 8.3% m/m in October, while imports fell by 0.6%. Excluding oil and erratics the figures were 9.0% and -1.5%, respectively. Meanwhile, prices of exports and imports both declined on the month, by 0.4% and 0.6%, respectively.
 
On the face of it, today's trade data are good news for the economy, and suggest that net trade could be more supportive of growth in Q4 than we had expected. However, trade data provide a highly imperfect picture of underlying trends, particularly on a monthly real-time basis, as witnessed by the large upwards revision to the September deficit and the significant m/m volatility seen in recent months.

The strength of exports to the euro area also presents something of a puzzle. This could simply reflect the poor quality of the data. However, recent survey evidence, such as November's manufacturing PMI, has also suggested that the relative weakness in goods exports, compared with domestic demand, may have been overstated. The view that external problems rather than home-grown ones lie behind that UK's poor growth performance is currently the dominant economic narrative, but the data are presenting it with some challenges.


source: BarCap