Canada hit by big trade deficit, low purchasing activity

Tue Jan 7, 2014 4:08pm EST
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By David Ljunggren

OTTAWA (Reuters) - Prospects for Canada's economy dimmed on Tuesday with news that activity by purchasing managers nosedived unexpectedly in December, while the country posted a big trade deficit a month earlier.

The double dose of bearish news helped push the Canadian dollar to its weakest level against the U.S. dollar since 2010. <CAD/>

The currency - already hit by the poor trade figures - fell to C$1.0763 to the greenback, or 92.91 U.S. cents, down from C$1.0713 to the U.S. dollar, or 93.34 U.S. cents, just before the purchasing figures were released.

In late October the Bank of Canada - concerned about the economy's sluggish performance and low inflation - said it expected annualized GDP growth in the fourth quarter to be 2.3 percent, down from 2.7 percent in the third.

Market analysts have long predicted that Canada will benefit from an increasingly strong U.S. recovery. But the Ivey Purchasing Managers Index showed activity in Canada contracted sharply and unexpectedly in December, its second straight dismal monthly performance.

The seasonally adjusted index fell to 46.3 from 53.7 in November, contrary to analysts' expectations for a rise to 54.5. A figure below 50 shows a fall in purchasing activity.

The news did little to cheer a currency market already unnerved by news that Canada had posted a November trade deficit of C$940 million ($879 million). The deficit - the 23rd in a row - was significantly bigger than the C$140 million shortfall forecast by market experts.

One reason for the jump was that Statistics Canada revised October's initial surplus of C$75 million to a deficit of C$908 million, in part to reflect revised data on crude oil prices. Initial trade statistics for any given month include estimates of crude prices rather than hard figures.   Continued...

A truck is loaded with a container at the Port of Montreal, September 27, 2010. REUTERS/Shaun Best