Canada’s Trade Deficit Narrows to C$435 Million on Energy

Canada’s merchandise trade deficit narrowed more than economists forecast in September as crude oil shipments led exports to the highest in almost two years.

The deficit of C$435 million ($414 million) followed a revised shortfall of C$1.09 billion in August, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg forecast a C$1 billion deficit, based on the median of 19 forecasts.

Canada’s 21st straight shortfall extends the longest streak in at least a quarter century, underlining weak foreign demand that’s curtailed business investment. Net exports will subtract 0.1 percentage points from growth this year, the Bank of Canada said in its October Monetary Policy Report.

“This month itself was encouraging,” said Mark Chandler, head of fixed income research at RBC Capital Markets. “You can certainly make the point we have a decent jumping off point for the fourth quarter.”

Canada averaged trade deficits of C$920 million in the three months ended September, the highest quarterly gap since the end of the third quarter of 2012.

The Canadian dollar depreciated 0.5 percent to $1.0505 per U.S. dollar at 10:57 a.m. in Toronto. One Canadian dollar buys 95.19 U.S. cents.

Crude Shipments

Exports rose 1.8 percent to C$40.6 billion in September, the highest since December 2011, Statistics Canada said. Crude oil and crude bitumen shipments rose to a record C$7.3 billion, and exports of aircraft and other transportation equipment rose 17.4 percent to C$1.6 billion.

Imports rose 0.2 percent to C$41.1 billion, Statistics Canada said.

The volume of exports advanced 1.7 percent and import volumes fell 0.2 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$4.30 billion in September from C$4.22 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.

“Uncertain global and domestic economic conditions are delaying the pick-up in exports and business investment, leaving the level of economic activity lower than the Bank had been expecting,” the Bank of Canada said in its Oct. 23 decision to keep its key interest rate at 1 percent.

In a separate report, Statistics Canada said Canada’s new home price index was unchanged in September after a 0.1 percent gain in August. It was the first time the index failed to rise since March 2011. Prices rose 0.5 percent in Calgary and declined 0.4 percent in Edmonton, Alberta’s provincial capital, the largest drop since June 2009.

Economists predicted the index would advance 0.l percent, according to the median estimate in a Bloomberg survey with eight responses.

From a year earlier, new home prices increased 1.6 percent.

To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net

To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net; David Scanlan at dscanlan@bloomberg.net

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