Canadian trade deficit climbs as Europe woes hit home

Wed Jul 11, 2012 10:59am EDT
 
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By David Ljunggren

OTTAWA (Reuters) - Canada's trade deficit unexpectedly rose in May, pushed up by record imports while exporters struggled to make any progress in the face of the European economic crisis.

The May deficit edged up to C$793 million ($777 million) from C$623 million in April, Statistics Canada said on Wednesday. Market analysts surveyed by Reuters had expected a deficit of C$380 million.

Exports are vital for the Canadian economy and accounted for around 31 percent of gross domestic product in 2011. Exporters have for years faced challenges from the strong Canadian dollar, weak markets and increased foreign competition.

"It's not inspiring. It looks like the rest of the world is clearly having an impact on the numbers," said Peter Hall, chief economist for the Export Development Corporation.

"There really isn't a way of putting a good spin on it ... on balance this is a pause month," he told Reuters, noting that oil prices had fallen during May as markets fretted about Europe. Canada is a major energy exporter.

Exports were virtually unchanged at C$38.88 billion with an increase in volumes offsetting a fall in prices.

Imports grew by 0.4 percent to a record C$39.67 billion on a 3.7 percent rise in the value of energy products. Even though Canada is a net energy exporter, many eastern Canadian refineries buy oil from abroad.

The previous high for imports was the C$39.51 billion seen in April 2012.   Continued...