Canada Trade Deficit Widens Less Than Forecast on Metals

Canada’s merchandise trade deficit was narrower than economists forecast in December as record exports of metals masked a decline in crude oil shipments.

The deficit of C$649 million ($519 million) followed a November shortfall that was revised to C$335 million from C$644 million, Statistics Canada said Thursday in Ottawa. Economists surveyed by Bloomberg forecast a December deficit of C$1.1 billion, based on the median of 15 forecasts.

Early signs of weakness in exports and business investment linked to crude oil’s drop below $50 a barrel from more than $100 last year triggered a surprise interest-rate cut on Jan. 21 from Bank of Canada Governor Stephen Poloz. Investors are betting on another rate reduction the next decision in March, with oil remaining below the $60 a barrel the central bank based its latest forecasts on, including that economic growth would slow to a 1.5 percent annual pace in the first half.

“We are leaning toward a rate cut in March still,” Robert Kavcic, a Bank of Montreal senior economist, said by telephone from Toronto. “We don’t have a read yet on how deep this slowdown is going to be in the first half.”

Canada’s dollar appreciated by 0.8 percent to C$1.2478 per U.S. dollar at 9:55 a.m. in Toronto. The currency closed at C$1.2732 per U.S. dollar on Jan. 30, the weakest since March 2009.

Precious Metals

Today’s report showed exports rose 1.5 percent to C$44.1 billion in December, the fastest gain since May. Metal and non-metallic minerals including “unwrought precious metals and metal alloys,” jumped 13.1 percent to a record C$5.61 billion, the agency said. Energy shipments fell for a seventh straight month, by 10.3 percent to C$8.56 billion, as prices fell 12.3 percent and volumes rose 2.3 percent.

Cenovus Energy Inc. said last month it will reduce spending this year by an additional 27 percent because of lower crude prices. The Calgary-based oil-sands producer now plans to spend C$1.8 billion to C$2 billion compared with an earlier target of C$2.5 billion to C$2.7 billion.

Imports also rose at the fastest pace since May, gaining 2.3 percent C$44.7 billion, Statistics Canada said. Energy imports rose 9.3 percent to C$3.48 billion as several refineries resumed full production after maintenance work, according to the agency, while the motor vehicle and parts category rose 3.3 percent to a record C$8.07 billion.

The volume of exports advanced 3.5 percent and import volumes rose 2.8 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. narrowed to C$3.12 billion in December from C$3.17 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.

For all of last year Canada reported a trade surplus of C$5.2 billion, compared with a C$7.2 billion deficit in 2013, Statistics Canada said.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE