Canada trade deficit hits record in July; exports slide

Tue Sep 11, 2012 1:31pm EDT
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By Louise Egan

OTTAWA (Reuters) - Canada had its biggest trade deficit on record in July as both exports and imports fell in an unexpectedly dismal performance that raised doubts about the economy's resilience in the face of persistent weakness in the United States and Europe.

The deficit bulged to C$2.34 billion ($2.36 billion) from a revised C$1.93 deficit in June, according to Statistics Canada data released on Tuesday, surpassing by a hair the previous record deficit of C$2.33 billion in September 2010.

A sharp drop in crude oil shipments contributed to a 3.4 percent drop in overall exports. Imports fell 2.2 percent, dragged down by energy products as well as by machinery and equipment in a reversal of the strong business investment in those items in the previous month.

Analysts in a Reuters survey had forecast, on average, a deficit of C$1.40 billion.

"This is about as bad as it gets for Canadian exporters - at least so far," said Derek Holt, an economist at Scotia Capital.

Canada's trade surplus with its dominant trade partner, the United States, withered to its smallest level in nearly two years, which analysts attributed partly to the strong Canadian dollar which makes it more difficult for exporters to compete there.

U.S. imports from China soared to a record high in July, according to data on Tuesday that showed the U.S. trade deficit grew slightly. <ID: nL1E8KB39O>

The data throws a new twist into the Canadian economic story, which has so far been about a relatively robust domestic economy in face of turbulence elsewhere in the world.   Continued...