Canada Runs First Trade Surplus Since January on Surge in Energy Exports
Canada recorded its first merchandise trade surplus in eight months in September, led by energy exports and a drop in machinery imports.
The country ran a surplus of C$1.25 billion ($1.23 billion) in September, Statistics Canada said today in Ottawa. The agency also said deficits in July and August were narrower than previously estimated, suggesting trade won’t be a drag on growth in the third quarter after triggering a contraction between April and June. The combined July and August deficit was pared to C$782 million from C$1.16 billion, the agency said.
“It shows there is a tremendous rebound on the trade side in the third quarter,” said Michael Gregory, a senior economist at Bank of Montreal’s BMO Capital Markets unit, adding that may change as Canadian exporters begin to feel the the impact of the European debt crisis. “Don’t expect a lot of support for the Canadian economy from net trade” in the future.
Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney have said in the last few weeks they are concerned the recovery is at risk because of Europe’s fiscal crisis and a sluggish U.S. recovery.
Exports make up about a third of Canada’s economy with three-quarters of the shipments going to the U.S.
Dollar Strengthens
Canada’s dollar appreciated 0.3 percent to C$1.0215 per U.S. dollar at 11:27 a.m. in Toronto. One Canadian dollar buys 97.90 U.S. cents.
None of the 18 economists surveyed by Bloomberg forecast a surplus in September, with the median estimate calling for a deficit of C$560 million.
In September, exports rose 4.2 percent to C$39.7 billion, the highest since October 2008.
Energy exports increased 11.3 percent to C$9.61 billion, in part because production was boosted by the reopening of oil refineries after maintenance shutdowns, Statistics Canada said. Shipments of industrial goods such as plastics and fertilizers rose 3.4 percent to a record C$10.5 billion, the fifth straight increase.
The economy probably grew at a 2.8 percent annual pace between July and September, as it benefited from an improvement in its trade balance, said Paul Ferley, assistant chief economist at Royal Bank of Canada in Toronto. Falling exports had led to an annualized 0.4 percent contraction in the second quarter.
Persistent Risks
“These encouraging developments do not offset the persistence of external risks related to high debt levels among a number of European economies,” that will lead the Bank of Canada to “maintain highly accommodative monetary conditions,” Ferley said. The central bank’s benchmark rate has been 1 percent since September 2010.
Imports fell 0.3 percent in September to C$38.5 billion on a 5.5 percent drop in automotive products to C$5.93 billion and a 3.3 percent decline in machinery and equipment to C$10.2 billion.
The volume of imports, which excludes the impact of price changes, fell 3.1 percent. Export volumes rose 0.3 percent.
The surplus with the U.S. widened to C$4.36 billion in September from C$2.79 billion in August.
In a separate report today, the country’s bankruptcy superintendent said that the number of such filings rose 16 percent in August to 6,769 from a month earlier. Bankruptcies dropped 8.6 percent from a year ago.
To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net
To contact the editors responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net; David Scanlan at dscanlan@bloomberg.net.
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