Canada Extends Record Streak of Trade Deficits

Canada extended the longest streak of merchandise trade deficits in a quarter century in May, with the shortfall narrowing as imports fell faster than exports.

The C$303 million ($287 million) deficit was the 17th in a row and followed an April gap that was revised to C$951 million from C$567 million, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg forecast the May deficit would be C$700 million, based on the median of 19 forecasts.

Bank of Canada Governor Stephen Poloz said in a June 19 speech that rebuilding business confidence and investment will require “patience” with shipments abroad weighed down by a lack of global demand. The central bank has called the export recovery the slowest since World War II, hampered by a strong currency and a lack of competitiveness among Canadian companies.

“There aren’t a whole lot of positives in this report,” said Benjamin Reitzes, a senior economist at BMO Capital Markets in Toronto. “June is probably going to be weak” because of flooding in Alberta and a Quebec construction strike, he said.

Imports fell 3.2 percent to C$39.6 billion in May, the first decline in five months. Shipments of crude oil and bitumen fell 34.1 percent to C$1.5 billion, the lowest since March 2009, while metal ores and minerals dropped 38.8 percent to C$777 million.

Exports fell 1.6 percent to C$39.3 billion in May, the fastest since July 2012, following April’s 0.4 percent decline. Metal ores and minerals fell 15.0 percent to C$4.2 billion and motor vehicles and parts declined 3.8 percent to C$5.4 billion.

Volumes Decline

The volume of imports declined 2.0 percent and import volumes fell 0.7 percent, Statistics Canada said. Volume figures adjust for price changes and can be a better indicator of how trade contributes to economic growth.

The surplus with the U.S. widened to C$3.45 billion in May from C$3.41 billion a month earlier. Exports make up about one-third of Canada’s economy, with about 75 percent of the shipments going to the U.S.

The U.S. Commerce Department reported today that the American trade deficit widened by 12.1 percent to $45 billion as imports climbed to the second-highest level on record.

Canada will record deficits in the broader trade measure known as the current account through 2015 according to a Bloomberg economist survey taken last month. The current account covers trade in services as well as goods.

The Canadian dollar fell 0.2 percent to C$1.0564 per U.S. dollar at 9:23 a.m. in Toronto. One dollar buys 94.66 U.S. cents.

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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