What is a trade gap?
The trade gap (or trade deficit in the US ) is the monetary difference between the imports and exports of an economy. Recent figures in the UK , for example, showed that the trade gap had widened to £6.5 billion, from £6.2 billion in May. Whilst exports rose 1.4% over the months, they were outstripped by imports, which rose 2.2%, therefore worsening the trade gap. The more recent weakness of sterling has clearly not yet had time to feed through. A weaker pound means that UK goods are cheaper abroad, which should mean that exports are stronger. The current situation is being compounded by the fact that the very countries to whom the UK exports are having economic difficulties of their own. Meanwhile, the overall trade gap narrowed in the second quarter of this year to £19.6 billion, which was the smallest number in three years. The Bank of England recently stated that the environment remains challenging The world economy remains in recession, though there have been increasing signs that
