The UK's seasonally adjusted trade deficit in goods and services decreased to 3.2bn pounds in December, versus a reading of 3.6bn pounds in the month before, according to data released this morning by the Office for National Statistics (ONS).

Despite erratic changes in the deficit over the last 12 months, the level across that period has remained largely flat, ONS added.

'In-line visible trade balance'

The so-called 'visible' trade deficit came in at £8.9bn, partly offset by an estimated surplus of £5.7bn on services. This is 'in-line' with market expectations.

Exports rose by 3.0% month-on-month while imports did so by only 1.1%. Trade with EU countries fell by 4.4% while that with non-EU ones increased 11.7%. In terms of quarterly rates of change however exports to EU countries was actually flat, versus a drop of 3.9% for sales to those outside.

Excluding oil and erratic items, the deficit on trade in goods was £22.2bn in quarter four. This was £0.2bn more than in the preceding quarter and £0.6bn higher than in quarter four of 2011.

Export prices (excluding oil and erratics) rose by 0.3% in the latest quarter while import prices rose by 0.2% in the same period.

Regarding the latter, the BoE said it would reinvest the £6.6bn gilt redemption due in March, offsetting what would otherwise be a passive unwinding of QE.

Commenting on all of the above Barclays Research highlights that: "Despite the small improvement in December, the trade deficit remains quite wide by historical standards. This is partly because of a gradual deterioration in the oil deficit over the past seven years, which has been exacerbated by a more recent deterioration in trade with both EU and non-EU partners."



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