Canada’s merchandise trade deficit narrowed more than economists forecast in August from the prior month’s record on the steepest decline in imports in more than three years.
The deficit of C$1.32 billion ($1.35 billion) followed a revised shortfall of C$2.53 billion in July, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg had forecast a C$1.9 billion deficit, based on the median of 21 forecasts.
Sluggish shipments abroad have helped keep Canada’s economic growth rate below 2 percent in the first two quarters of this year. Bank of Canada Governor Mark Carney has kept his benchmark interest rate at 1 percent for more than two years, the longest pause since the 1950s, and said the recovery in exports is the slowest since World War II.
Imports declined 3.1 percent to C$38.8 billion in August, the fastest since May 2009, with drops in every major category except energy, Statistics Canada said. Industrial goods and materials fell 7.4 percent to C$7.92 billion while machinery and equipment declined 3.8 percent to C$10.4 billion. The volume of imports, which excludes price changes, fell 2.2 percent.
There is “nothing to celebrate” in the report, said Jimmy Jean, a strategist in the fixed-income group at Desjardins Capital Markets in Montreal. “We had a big drop in imports of machinery and equipment -- that speaks to a lack confidence in investment.”
Canada’s dollar added 0.4 percent to 97.75 cents per U.S. dollar at 10:45 a.m. in Toronto, after declining 0.4 percent yesterday. One Canadian dollar buys $1.0230.
Exports decreased 0.1 percent to C$37.5 billion in August, Statistics Canada said. Energy shipments in August rose for the first time in seven months, by 5.5 percent to C$8.59 billion, while industrial goods and materials fell 6.1 percent to C$8.82 billion. Export volumes rose 0.7 percent.
Trade has weakened in the third quarter, suggesting economic growth may again be slower than 2 percent, said Royal Bank of Canada economist David Onyett-Jeffries.
“The downside risks to growth, along with the impact of the strong currency on trade, are likely to be in focus in the upcoming policy discussions at the Bank of Canada,” he said in a client note.
Canada’s trade balance has swung from a surplus of C$3.19 billion in December to a series of five straight deficits through August.
Canada has said that “frank discussions” are needed on steps to protect the global economic recovery at International Monetary Fund meetings in Tokyo this week. The IMF cut its global growth forecast Oct. 9, citing the euro area’s debt crisis.
Exports make up about one-third of Canada’s economy, with about 75 percent of the shipments going to the U.S.
Canada’s trade surplus with the U.S. widened to C$3.48 billion in August from C$2.02 billion a month earlier.
Statistics Canada also said today that on Oct. 18 it will present a new set of trade data making it compatible with changes to the so-called national accounts used to formulate the country’s gross domestic product.