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Last Updated: Thursday, 10 May 2007, 09:45 GMT 10:45 UK
UK trade deficit widens to 4.5bn
McVitie's biscuit factory
Despite a widening trade gap, output rebounded
The UK trade gap widened once again in March, Office for National Statistics (ONS) figures show.

The shortfall in trades and services grew to 4.5bn in March, from 4.3bn a month earlier.

A deteriorating goods gap - which grew to 7bn - was a key factor in the fall, with the figure at its highest level since May last year.

But, output from UK factories rebounded in March, rising 0.6% - its highest rate since May 2006.

Meanwhile, the output figures are likely to allay fears for the UK manufacturing industry, suggesting that a tentative recovery that began last year is back on track.

The UK's trade gap with the enlarged European Union (EU) widened to 3.1bn during the month from 2.8bn in February, as car imports increased.

On the upside, the deficit with non-EU countries narrowed slightly to 4bn from 4.1bn during the period.

Rates implications

Experts said the figures were likely to reinforce expectations that the Bank of England will raise interest rates later on Thursday.

"The message is the economy continued to perform well," said Adam Chester of HBOS Treasury Services.

He added that the strong pound was not weighing too heavily on manufacturing while strong trade imports suggested consumer spending remained "healthy".

"Implications for interest rates: it cements expectations for a 25 basis point hike," he added.

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