Canada Posts Surprise August Trade Deficit as Exports FallGreg Quinn
Canada swung to an unexpected merchandise trade deficit in August as imports surged to a record and exports fell for the first time in four months.
The C$610 million ($543 million) deficit followed a July surplus that was pared to C$2.20 billion from the initial C$2.58 billion estimate. None of the 14 economists in a Bloomberg survey predicted that Ottawa-based Statistics Canada would report a trade deficit today, and the median estimate was for a C$1.6 billion surplus.
The report is another setback in a week that saw Statistics Canada report the world’s 11th-largest economy stalled in July after a second-quarter expansion that was led by a jump in exports. Bank of Canada Governor Stephen Poloz said last month he saw early signs of a needed rotation toward growth led by exports and business investment.
“There’s no sugar coating the fact that the August trade report was sorely negative,” said Robert Kavcic, a Bank of Montreal senior economist in Toronto, in a note to clients.
Canada’s dollar depreciated 0.7 percent to C$1.1237 per U.S. dollar at 9:31 a.m. in Toronto, the weakest since March 24.
Exports fell 2.5 percent to C$44.2 billion in August, with declines in nine of 11 major categories. Energy products dropped 5.8 percent to C$10.5 billion amid lower prices, and forestry products declined 2.3 percent to C$3.03 billion.
Imports rose 3.9 percent to a record C$44.8 billion, Statistics Canada said, featuring a 24.1 percent jump in metal and non-metallic minerals to C$4.40 billion. Energy grew by 20.8 percent to C$4.25 billion and consumer-goods imports rose 4.4 percent to a record C$9.05 billion.
Canada’s trade in automobiles fell in August from July, when several automakers canceled or cut short traditional shutdowns, Statistics Canada said. Motor vehicle and parts exports fell 11.2 percent to C$6.06 billion in August and imports dropped 7.2 percent to C$7.24 billion.
The volume of imports rose 2.4 percent and export volumes fell 1.8 percent, Statistics Canada said. Volume figures adjust for price changes and can be a better indicator of how trade contributes to economic growth.
July’s revision means that month’s surplus is no longer the widest since 2008, when the last recession took hold. The country’s share of global trade has dropped over the past two decades with Canadian exports growing 141 percent in that period, compared with 242 percent worldwide and 250 percent in the U.S., according to Carl Weinberg, chief economist at High Frequency Economics.
Speaking yesterday in Brampton, Ontario, Prime Minister Stephen Harper said Canada is “not going to compete on low-skilled, mass-manufactured products,” and said the country will “compete in areas of manufacturing that are innovative, that are high-end, often that are niche-oriented, that require investments in capital and highly-skilled workforces.”
Canada’s trade surplus with the U.S. narrowed to C$3.51 billion from C$4.76 billion in July. The U.S. trade deficit unexpectedly shrank in August to the lowest in seven months on record exports. The gap decreased to $40.1 billion from a revised $40.3 billion in July, the Commerce Department reported today in Washington.