AN improvement in the trade figures in March masked an underlying deterioration in the trend as the strength of sterling continued to eat into export volumes.
The drop in the export orders balance in Thursday's CBI survey points to a continued decline in export trade.
The global trade deficit declined from #2122m in February to #1538m in March, while the surplus in services was little changed at #469m to produce an overall deficit of #1069m, against #1661m in February.
The bulk of the improvement occurred in trade in goods with non-EU countries.
The trend continued in April when the non-EU deficit fell further to #715m from #1018m in March, largely because of a reduction in the import bill.
The deficit in goods jumped from #4222m in the final quarter of last year to #4690m in the first quarter of this year, as the strength of sterling and the Asian crisis took their toll.
The latest quarterly deficit was the highest since the second quarter of 1990.
Dharshini David, UK economist at HSBC Securities, said: ''There were clear signs of the strong pound and the Asian crisis making their mark, with global export volumes falling by 0.5% in the three months to March and export volumes to non-EU countries dropping by 2.8% in the three months to March.''
Despite the smaller deficit in non-EU trade in April, export volumes continued to fall and were 2.4% lower in the three months to the end of April.
The deterioration in Britain's export earnings is expected to continue as volumes decline, and a current account deficit of #9000m is forecast by HSBC for the full calendar year.
The trade figures were better than the City had expected. Data for trade with the EU in April and for global trade in services are not yet available.
The Bank of England expects the decline in Britain's net trade to make a major contribution to an expected slowdown in economic activity.
The Bank's monetary policy committee meets on Wednesday and Thursday of next week, but is expected to leave interest rates unchanged at 7.25%.
The trade figures are unlikely to weigh heavily on the committee's deliberations.
Meanwhile, the harmonised index of consumer prices, considered to be comparable with other EU inflation rates, rose from 1.6% in March to 1.9% in April, largely due to Budget increases in excise duties.
This measure of UK inflation is well below headline inflation of 4% and underlying inflation, excluding mortgage interest payments, of 3%, but is about 0.5% higher than the EU average.
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