The deficit on goods narrowed from a downwardly revised £18.87 billion in July to a smaller than expected £15.06 billion in August, a 5-month low. Imports decreased 0.2 percent while exports jumped 12.9 percent after slumping 9.5 percent previously.

The deficit with the EU was £10.11 billion, down from £12.02 billion as exports climbed 10.5 percent and imports fell 1.7 percent. The shortfall with the rest of the world shrank from £6.85 billion to £4.95 billion with exports up some 15.1 percent.

The overall trade deficit for the three months ending in August 2024 increased by £3.0 billion to £10.0 billion, despite the increase in exports. This was predominantly the result of an increase in goods imports, which brought the goods trade deficit to £52.4 billion, an increase of £2.6 billion. Moreover, the deficit was further exacerbated by a £0.4 billion decrease in the services trade surplus, which now stands at £42.4 billion.

The trade data remain as erratic as ever and accordingly, are largely ignored by financial markets. Today's data put the RPI at 23 and the RPI-P at 22, showing a moderate degree of overall economic outperformance versus market consensus.

The global goods deficit is expected to narrow to £19.2 billion from a surprisingly large £20.0 billion in July.

The merchandise trade balance measures the difference between imports and exports of goods. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade and can offer a guide to an economy's competitiveness. Data are supplied by over 30 sources including several administrative sources, HM Revenue and Customs (HMRC) being the largest.

Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect currency values in foreign exchange markets.

Imports indicate demand for foreign goods and services in the UK. Exports show the demand for UK goods in countries overseas. The pound sterling can be particularly sensitive to changes in the trade deficit run by the United Kingdom, since the trade shortfalls create greater net demand for foreign currencies. The bond market is also sensitive to the risk of importing inflation. This report gives a breakdown of trade with major countries as well, so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country.

The UK's trade balance is particularly susceptible to swings in the oil account and so within the overall goods balance, financial markets will normally focus on the balance excluding oil and other erratic items.