Canadian trade gap unexpectedly narrows
Energy exports continue to rebound
Canada’s merchandise trade deficit unexpectedly narrowed in October as imports fell and energy exports continue to recover, suggesting the country’s economy may be recovering from last quarter’s export-driven slump.
Canada recorded a $169-million trade deficit in October, down from a revised $1.01-billion gap in September, Statistics Canada said Tuesday in Ottawa.
The shortfall was narrower than all 21 forecasts in a Bloomberg survey of economists that had a median estimate of a $1.2-billion deficit.
The report marks a third straight narrowing of the trade deficit since the country posted a record $2.71-billion shortfall in July.
Statistics Canada reported last month that expansion of the world’s 11th largest economy slowed to a 0.6 per cent annual pace in the third quarter, as exports fell the fastest since the recession in mid-2009, due in part to a number of temporary maintenance shutdowns in the energy sector.
A recovery in energy “hopefully continues to support this idea we’ll see a reversal in net exports,” said Paul Ferley, assistant chief economist in Toronto at Royal Bank of Canada.
Exports rose one per cent in October to $38.1 billion, led by an 18 per cent gain in farm and food products. Energy exports rose three per cent, gaining for a third consecutive month as prices increased.
Exports of crude and bitumen, which have declined 2.5 per cent from a year earlier, rose five per cent in October.
Weak global demand and a strong Canadian dollar, boosted in part by the country’s reputation as a haven for investors, have been a drag on exports that have led to trade deficits and prompted Bank of Canada governor Mark Carney to damp ex- pectations for interest rate increases. Seven of the 12 major export components tracked by Statistics Canada recorded year-over-year declines in October, led by falling exports of metals and industrial products.
Carney said in October that interest-rate increases are “less imminent” due to risks to economic growth, including moderate global demand and record domestic debt burdens.
The country has run trade deficits in 36 of the past 47 months, after a string of more than 30 years of consecutive monthly surpluses.
Imports fell 1.2 per cent to $38.3 billion in October, led by a 39 per cent drop in petroleum refinery products.
The volume of exports, which exclude price changes, increased 0.3 per cent in October while import volumes fell 1.8 per cent.
Canada’s trade surplus with the U.S. narrowed to $2.77 billion in October from $3.21 billion a month earlier.