Canada’s trade deficit jumps to highest level recorded
$ 2.34- billion shortfall — the deepest since Statscan began keeping track — comes as ‘ fragile’ world economy threatens return to recession
OTTAWA — Canada’s darkening trade picture is again raising warning flags over the country’s elevated currency and lagging productivity as the global economy threatens to slide back into recession.
The trade deficit jumped to $ 2.34 billion in July, the highest level since 1971, when Statistics Canada began compiling such data, with both exports and imports declining during the month, the agency said Tuesday.
The July shortfall — reflecting a “broad- based weakness” in the economy, according to one economist — was up from a revised $ 1.93 billion a month earlier, and narrowly eclipsed the previous high of $ 2.33 billion recorded in September 2010.
The number was also well off the $ 1.45- billion deficit expected by economists, and was blamed mainly on surprisingly large declines in energy exports and imports — in terms of both prices and volumes.
Finance Minister Jim Flaherty, speaking in St. John’s following the release of the trade data, said the global economy “remains frustratingly fragile.”
“Any potential offshore setbacks could generate serious adverse impacts on Canada,” he said in a speech to the St. John’s Board of Trade. “For example, growth in a number of emerging market economies is slowing, and concerns are growing about the capacity of the U. S. to balance the necessary fiscal consolidation while sustaining economic growth,” he said.
“But the major immediate threat is the enduring sovereign and banking crisis in Europe, which has pushed some countries back into recession. Overall, Canadian exports were down 3.4 per cent to $ 37.7 billion, as volumes declined two per cent. Imports declined 2.2 per cent to $ 40.1 billion, with volumes down 1.2 per cent. In addition to energy, imports of machinery and equipment were also weaker.
“While an 8.5- per- cent drop in energy exports was the major factor, make no mistake, this report flashed broad- based weakness,” said Douglas Porter, deputy chief economist at BMO Capital Markets.
Canada’s trade surplus with the U. S. narrowed to $ 2.11 billion in July from $ 3.02 billion the previous month — the smallest since October 2010.