Trade deficit shrinks more than expected on oil recovery
Canada unexpectedly ran one of its smallest trade deficits in recent years in December on a sharp recovery in oil shipments after the completion of repairs on a pipeline.
The December gap fell to $370 million, down from a revised deficit of $1.2 billion in November, Statistics Canada said Wednesday. Economists had forecast a deficit of $610 million. It was largely an energy story, with shipments of crude up 18 per cent during the month.
It’s the best trade reading since the country recorded a small surplus in May. Canada has averaged monthly trade deficits of $1.8 billion over the past three years.
Canada’s struggling exporters had been one of the main reasons for the nation’s slowdown at the end of last year, so the December recovery in shipments could stoke hope the trade sector will contribute more to growth in future. But a prolonged period of sluggish imports, which persisted into December, continues to raise questions about weak domestic demand.
While exports jumped 1.9 per cent, imports recorded just a 0.2-per-cent gain. Imports are down more than five per cent since hitting 2019 highs in March. Industrial machinery and equipment dropped four per cent in December, an indication businesses may be curtailing investment.
“The pullback is still not a good sign for near-term domestic demand growth,” Nathan Janzen, senior economist at RBC Economics, said in a note to investors.
The export pick-up during the month erases a 1.9-per-cent decline in November, which had been hampered by a CN Rail strike and the rupture of the Keystone pipeline in North Dakota. Excluding energy, gains were just 0.3 per cent.
Even with the rebound in exports in the final month of 2019, which included a 2.8-per-cent jump in volumes, the trade sector looks to have been a major drag on growth in the fourth quarter.
For all of 2019, Canada recorded a deficit of $18.3 billion, the smallest annual gap since 2014.