Canada posts higher-than-expected trade deficit in September on lower prices
CANADA posted a higher than expected trade deficit of C$1.26 billion (S$1.3 billion) in September mainly on account of lower prices which pulled down the value of exports but overall volumes of outbound shipments rose, data showed on Tuesday (Nov 5).
The September data was its seventh straight monthly trade deficit, primarily led by a fall in value of lower exports to major trading countries other than its biggest trading partner the US, Statistics Canada said.
Most of the decline in exports was due to lower prices of crude oil and other commodities which cumulatively dropped by 1.5 per cent. In volume terms exports were up 1.4 per cent.
Economists said the data showed exports were strong in September and that should give momentum to trade in the fourth quarter.
Due to an ongoing digital transition at Canada Border Services Agency Assessment and Revenue Management, from where Statscan gets most of its trade data, results for September include greater use of estimation.
Analysts polled by Reuters had predicted a deficit of C$800 million and Statscan revised sharply the August trade deficit to C$1.47 billion from C$1.1 billion.
The biggest hit to exports, which fell by 0.1 per cent, came from a 5.4 per cent drop in shipments of metal and non-metallic mineral products, led by a 15.4 per cent slump in the unwrought gold category.
Total exported goods prices dropped 1.5 per cent, Statscan said.
“So these were really pricing stories both when you look at metals and energy,” Stuart Bergman, chief economist at Export Development Canada.
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“There is some cause for optimism in some of those details,” he said.
Inbound shipments declined 0.4 per cent in September but were largely flat in volume terms. Imports of metal and non-metallic mineral products decreased 12.7 per cent and contributed the most to the overall decline.
The drop in imports largely reflect Canada’s weak demand environment and sluggish growth prospects which have taken a hit under the impact of high interest rates which the Bank of Canada started reducing from June.
Since then, the BoC has cut its key policy rate to 3.75 per cent.
Economists are hoping further cuts in interest rates will help reinvigorate local demand in the coming quarters.
The BoC will announce its next monetary policy decision on Dec 11 with money markets bets inching close to 50 per cent for a 50-basis point cut.
The Canadian dollar firmed by 0.18 per cent to 1.3876 to the US dollar by 1333 GMT, or 72.07 US cents. Yields on two-year government bonds were up 2.89 bps at 3.134 per cent.
Total exports were at C$63.88 billion while imports were at C$65.14 billion.
Canada’s trade surplus with the US, which accounts for over three-quarters of its total exports, increased to C$8.29 billion in September from C$7.82 billion a month ago. Imports from the US, which is 60 per cent of all Canadian imports, rose 0.8 per cent month on month. REUTERS
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