Canada Posts Narrowest Current Account Deficit Since 2008

Canada’s current account deficit was the narrowest since 2008 in the third quarter as non-energy exports increased and deficits in investment and tourism declined.

The shortfall of C$8.40 billion (C$7.47 billion) from July to September, reported by Statistics Canada from Ottawa today, was narrower than all 13 estimates in a Bloomberg News survey, which had a median of C$11.2 billion. The agency also reduced its estimate of the second-quarter deficit to C$9.91 billion from C$11.9 billion.

Bank of Canada Governor Stephen Poloz has said sustained gains in exports and business investment must lead the economy back to full output over the next two years. Another reduction in the current-account deficit is unlikely because of the recent decline in the price of crude oil, says Avery Shenfeld, chief economist at CIBC World Markets in Toronto.

“Weaker oil prices could significantly dent the fourth quarter results,” Shenfeld wrote in a research note. Crude oil is one of Canada’s most important exports, and prices on the New York Mercantile Exchange have dropped 26 percent this year.

The surplus in traded goods widened to C$2.90 billion in the third quarter from C$2.33 billion the prior three months, Statistics Canada said. Exports of metal and non-metallic minerals rose C$1.3 billion and motor vehicle and parts shipments rose by C$400 million, more than offsetting a C$1.1 billion drop in energy exports as crude oil prices fell.

Canada’s dollar depreciated by 0.8 percent to C$1.1339 at 1:15 p.m. Toronto time, as oil prices fell to a four-year low after OPEC kept its oil production ceiling unchanged. Five-year federal government bond yields fell to 1.43 percent from 1.47 percent.

Travel Deficit

The deficit in travel services narrowed to C$4.38 billion from C$4.55 billion as fewer Canadians visited the U.S., Statistics Canada said.

For investment income, the deficit narrowed to C$4.76 billion from C$5.14 billion as Canadians earned more profit on companies abroad that they controlled.

Canada’s current account, the broadest common measure of trade that includes goods, services and investment, swung from a C$3.97 billion surplus to a C$10.9 billion gap at the end of 2008 and has been in deficit since then.

The shortfalls will continue through at least 2016, and be equal to 2.1 percent of gross domestic product next year according to a Bloomberg economist survey.

Statistics Canada also said today that average weekly earnings of non-farm payroll employees rose 3.4 percent in September from a year earlier. The average number of hours worked rose to 33 from 32.8 over that period. The number of workers on payrolls was little changed in September from August.

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