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The U.K. trade deficit narrowed in February as record oil sales and the weakness of the pound kept exports close to the highest in 1 1/2 years.

The goods trade gap was 7.5 billion pounds ($14.8 billion), compared with 7.9 billion pounds in January, the Office for National Statistics said in London today. The result matched the median forecast of 24 economists in a Bloomberg News survey. Exports fell 0.2 percent and imports declined 1.7 percent.

Manufacturing reached the strongest level since 2001 in February, buoyed by a drop in the pound against foreign counterparts including the euro. The British currency has fallen on speculation the Bank of England will cut its benchmark interest rate for a third time since December as soon as today to shore up economic growth.

“The impact of the weaker currency is positive,'' said Peter Dixon, an economist at Commerzbank AG in London. “Looking forward, trade conditions are going to be pretty poor with global growth slowing. We are approaching a period where exporters will find it difficult in spite of the weaker pound.''

Oil sales climbed to 2.5 billion pounds, the highest since monthly records began in 1980, as the price of crude increased, the statistics office said. The cost of a barrel of crude reached an all-time high of $112.21 yesterday. The oil balance was in surplus for the first time since April 2006.

Goods Exports

Total goods exports were little changed at 20.5 billion pounds in February, the statistics office said. Apart from oil, overseas sales of cars and basic materials rose.

The pound fell to a record 80.29 pence against the euro after the report today. The British currency has fallen 11 percent in the past year on a trade-weighted index compiled by the central bank. U.K. exporters sell about half their goods to the euro region.

Sales to the European Union fell 4 percent, less than the 4.2 percent drop in imports. Exports to the rest of the world increased 5.4 percent to a record 8.6 billion pounds, outpacing the 1.5 percent gain in imports electronic check payday advance http://paydayloans-on.com.

U.K. manufacturing unexpectedly rose for a second month in February to the strongest level since March 2006, data from the statistics office showed yesterday.

A narrowing deficit may support economic expansion, helping to offset weakening consumer spending and service industries.

“Most people are looking for a turnaround in the contribution of net trade to the U.K. economy, which has been a sizable drag on growth,'' said Nick Bate, an economist at Merrill Lynch & Co. in London and a former Treasury official.

Slowing Growth

Slowing economic expansion overseas may still curb demand for British goods. The International Monetary Fund yesterday estimated a 25 percent chance of a worldwide economic downturn and lowered its forecast for global growth to 3.7 percent this year from a 4.1 percent prediction in January.

The IMF also reduced its forecast for U.K. growth this year to 1.6 percent from 1.8 percent and said that the Bank of England has scope to lower interest rates. Central bank Executive Director Paul Tucker said last week there was a risk that economic growth will slow “considerably'' because of turmoil in credit markets.

“Two fairly sluggish years lie ahead of us,'' Geoffrey Dicks, chief U.K. economist at Royal Bank of Scotland Group Plc, said in Bloomberg Television interview. “It's a more difficult climate for business.''

Fifty-two of 61 economists in a Bloomberg survey predict the central bank will reduce the rate to 5 percent today, with the remainder forecasting it will keep it unchanged at the current 5.25 percent.

Neil Mackinnon, chief economist at London-based hedge-fund ECU Group Plc, said policy makers may vote for a half-point cut.

“No central bank regardless of their mandate can ignore what's going on in the real economy,'' he said in a Bloomberg Television interview.

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