Canada’s merchandise trade deficit reached a record in March as energy exports declined and imports of consumer goods increased, one of the starkest signs of an oil shock the central bank says stalled the economy early this year.
The C$3.02 billion ($2.51 billion) deficit broke the old record of C$2.87 billion set in July 2012, Statistics Canada said Tuesday in Ottawa. The shortfall exceeded the highest forecast of C$1.33 billion in a Bloomberg economist survey with 15 responses, which had a median forecast predicting the trade deficit would narrow.
Canada’s trade balance has been dominated by oil prices that collapsed more than 50 percent in the second half of last year. March’s trade shortfall is the sixth straight for the Group of Seven’s largest exporter of crude, which had a surplus of C$2 billion as recently as July.
“It’s a big disappointment relative to the consensus expectation,” Nick Exarhos, an economist at CIBC World Markets in Toronto, said by telephone. “It highlights that Canada is more reliant than ever on the energy sector.”
Exports outside the energy industry such as automobiles and machinery will help overcome the shock of last year’s drop in oil prices, with signs of the shift becoming visible in the next few months, Bank of Canada Governor Stephen Poloz told lawmakers last week.
Energy exports fell by 8.9 percent to C$6.89 billion in March, including a 29.7 percent drop in refined petroleum products to C$855 million, Statistics Canada said. Energy prices declined 7 percent and volumes fell 2.1 percent. From 12 months earlier, energy exports were down by 43.7 percent.
Imperial Oil Ltd., the Canadian oil-sands company owned by Exxon Mobil Corp., reported on April 30 first-quarter profit fell by more than half as crude prices tumbled. Capital spending in Western Canada’s energy industry will fall 33 percent to C$46 billion in 2015, the Canadian Association of Petroleum Producers said on Jan. 21.
Excluding energy, exports rose by 2.4 percent in March, including an 11.7 percent gain in automobiles and parts to C$6.6 billion. Total exports increased 0.4 percent in March to C$42.5 billion, and were down 3.1 percent from a year earlier.
Today’s report doesn’t show non-energy shipments have the strength to pick up the slack created by the drop in energy, Exarhos said.
“The Bank of Canada asserts that they already see some signs of the non-energy sector picking up, and we aren’t as confident,” he said. “We need to see a protracted period where the dollar is weak and oil prices are higher for people making these plant decisions” to build new capacity in Canada, he said.
Imports gained 2.2 percent to a record C$45.5 billion, as consumer goods jumped by 7.9 percent to C$9.98 billion. Goods brought in from China rose 28.1 percent to C$4.12 billion.
The agency revised the February deficit to C$2.22 billion from C$984 million on updated energy figures. The revisions increased the size of deficits over the past four months by C$2 billion.
The volume of exports advanced 1.9 percent and import volumes rose 1.5 percent in March, Statistics Canada said. Volume figures adjust for price changes and can be a better indicator of how trade contributes to economic growth.
The volume figures suggest that while trade may still add to economic growth in the first quarter, overall output will be little changed as the Bank of Canada projects, said Toronto-Dominion Bank senior economist Randall Bartlett.
Canada’s dollar strengthened 0.5 percent to C$1.2037 per U.S. dollar at 9:53 a.m. Toronto time. The currency gain came on a day when crude oil rose above $60 a barrel in New York for the first time since December and the U.S. trade deficit widened in March to the highest level in more than six years.