UK Feb non-EU trade gap shrinks sharply as exports soar

Britain's goods trade gap with countries outside the EU narrowed much more than expected in February as exports leapt and imports dived, in a sign that the weaker pound may be starting to have an impact.

Official data on Thursday from the Office for National Statistics also showed the first annual fall in PPI input prices since August 2007 as the cost of crude oil has plummeted.

The ONS said the non-EU trade gap narrowed to 3.964 billion pounds in February from 5.631 billion pounds in January as exports leapt 12.8 percent and imports fell 5.4 percent.

Analysts had predicted a narrowing to 5.35 billion.

Statisticians cautioned against reading too much into the data because of volatility in adjusting the figures for seasonal trends as a result of VAT carousel fraud.

However, analysts said weaker sterling was bound to have a beneficial impact this year despite a collapse in global trade.

Sterling fell some 25 percent in 2009 and hit a 23-year low of $1.35 in January before recovering a little. It fell to a session low of $1.4638 after the data, having earlier risen as high as $1.4779. Sterling also fell some 30 percent against the euro in 2008, but has regained 5 percent since the start of the year.

"We will see further improvements going forward from sterling," said George Buckley, chief UK economist at Deutsche Bank.

The overall goods trade gap narrowed to 7.315 billion pounds in February from 7.821 billion in January.

In separate ONS data, input prices rose 1.0 percent on the month in March to stand 0.4 percent lower than a year ago. Both figures were stronger than forecast but the annual reading represented the first fall in manufacturers' costs in almost two years.

Economists expect price pressures will ease markedly as global demand wanes this year.

Output prices were up 0.1 percent on the month, leaving them 2.0 percent higher on the year — the weakest annual rate since July 2007.