Canadian exports stumble in August, imports bump up

• Call it a blip or a seasonal anomaly, but the country’s surprise swing to a trade deficit is bound to give the Bank of Canada some pause for thought on the economy’s wavering momentum.

August was expected to be another healthy month for exports — coming after a $2.2-billion surplus in the previous month.

Instead, the value of goods and services delivered to global markets fell into the red by the tune of $610-million, as exports declined 2.5% and imports rose 3.9%.

Forecasters had called for a surplus of $1.6-billion in August — following the July tally, which Statistics Canada on Friday revised slightly downward from its previous estimate of $2.58-billion.

The Bank of Canada “has been repeating concerns regarding the lack of momentum in both exports and business investment in the current expansion,” said Charles St-Arnaud, a London-based economist with Nomura Global Economics in London, who previously worked at the central bank in Ottawa.

Mr. St-Arnaud said policy-makers “will remain concerned about growth until we see a sustainable pickup in those sectors ... [and we] remain cautious on the outlook for exports for at least the rest of the year.”

Central bank Governor Stephen Poloz has acknowledged signs of traction in a long-predicted rotation to exports and investment as the engines of growth, taking over from the robust household spending that drove the economy’s initial rebound from the 2008-09 recession — helped along by the bank’s near-record-low interest rate policy.

That trendsetting lending rate edged up to 1% in September 2010, but the direction and timing of the next move could still be another year or two away — dependent on how the economy performs.

In July, growth in gross domestic product was flat after six monthly gains in a row.

In Friday’s report, Statistics Canada said the value of exports fell to $44.2-billion in August, led by declines in shipments of vehicles and auto parts, as well as energy products. Imports, meanwhile, rose to $44.8-billion during the month.

“It was a bit of a shock, but I think the important thing is ... to put the [export] contraction in context,” said Stuart Bergman, assistant chief economist at Export Development Canada, the Ottawa-based federal credit agency.

“The biggest hits here came in the energy sector, down 5.8% and autos down 11.2%.

“But when we look at the energy side, that was mainly on weaker prices. And in autos, it was all volumes,” he said.

Economist Robert Kavcic at BMO Capital Markets said “there’s no sugar coating the fact that the August trade report was sorely negative.”

“But, Canadian trade numbers have swung wildly in recent months, partly because of some seasonal distortions, and it’s probably a bit soon to write off the export recovery.”

However, David Madani, at Capital Economics, said “the fact that most export categories showed small declines, or flat growth, was a bit disconcerting.”

“This is further evidence that the consensus estimate for third-quarter growth of 3% is too high,” with Capital forecasting 2.4% annualized growth between July and September.