Canada plunges to unexpected trade deficit

Canada posted an unexpected trade deficit of $610-million in August, snapping a string of strong trade numbers, as imports surged while exports took a breather.

Statistics Canada reported that imports jumped 3.9 per cent from July, to a record $44.8-billion, led by mining and energy products. Exports dipped 2.5 per cent, retreating from July’s record high, in a broadly based pullback led by the auto and energy sectors. Nine of 11 export sectors showed declines.

...The surprise deficit ends a three-month streak of strong trade numbers, during which time the economy generated a cumulative surplus of $4.1-billion, its best three-month performance since 2008.

But Statscan also said those previous surpluses weren’t as strong as it had previously reported. The July surplus was revised down to $2.2-billion from an originally reported $2.6-billion, while June’s surplus was revised down to $1.6-billion from $1.8-billion and May’s surplus was trimmed to $315-million from $449-million. All together, the revisions for the three months combined for a $730-million reduction.

The Canadian dollar lost nearly half a cent to just below 89 cents (U.S.) in reaction to the trade report, as well as unexpectedly strong U.S. employment and trade numbers that were released at the same time.

But economists, while disappointed with the August result, cautioned that a single soft month doesn’t change the broader trend of an improving environment for Canadian trade.

...On the import side, prices were up 1.6 per cent on the month while volumes rose 2.4 per cent. Six of 11 sectors posted increases. Metal and mineral products surged 24.1 per cent, while energy products jumped 20.8 per cent. Consumer goods were up 4.4 per cent.

Even with August’s pullback, over the first eight months of the year Canada has recorded a cumulative trade surplus of $4.7-billion, a sharp reversal from the $5.3-billion deficit over the same period in 2013...

This has been excerpted from 3 October 2014 article by the Globe and Mail (subscription may be required).