Canada posts unexpected trade deficit as exporters struggle

Fri Oct 3, 2014 10:27am EDT
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By David Ljunggren

OTTAWA (Reuters) - Canada unexpectedly posted a C$610 million ($545 million) trade deficit in August as exports dropped and imports rose by the largest amount in almost two years to hit a record high, Statistics Canada data showed on Friday.

Market analysts had expected a C$1.55 billion surplus after a revised C$2.20 billion surplus in July.

The figures suggest the export sector, which accounts for around 30 percent of gross domestic product, is still having trouble shrugging off the after-effects of the 2008 recession.

The Bank of Canada says it will not raise interest rates from their current near-record lows until it sees signs of an entrenched economic recovery. The bank is due to make a rate announcement and release updated economic forecasts on Oct. 22.

"This gives plenty of scope for (Bank of Canada) Governor (Stephen) Poloz to remain cautious," said TD Securities strategist Mazen Issa.

The data, along with stronger-than-expected U.S. jobs growth, pushed the Canadian dollar down to a more than six-month low against the greenback. [CAD/]

The loonie CAD=D4 touched a session low of C$1.1244, or 88.94 U.S. cents, its lowest level since late March, down from Thursday's close of C$1.1163, or 89.58 U.S. cents.

Exports in August dropped by 2.5 percent to C$44.19 billion on lower shipments of motor vehicles and parts as well as energy products. Volumes fell by 1.8 percent while prices dropped by 0.7 percent.   Continued...