Canada trade deficit jumps, exports drop after good start to 2016

Tue Apr 5, 2016 10:17am EDT
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By David Ljunggren

OTTAWA (Reuters) - Canada's trade deficit unexpectedly jumped in February as exports dropped by the most in almost seven years, reflecting the volatility still hampering an economy hit by low oil prices.

Statistics Canada said on Tuesday the deficit hit C$1.91 billion ($1.45 billion), up from a C$628 million shortfall in January. Market operators polled by Reuters had forecast a deficit of C$900 million.

Exports dropped by 5.4 percent, the largest monthly decline since May 2009, on lower shipments of consumer goods, energy products and motor vehicles and parts.

The news disappointed analysts who had been encouraged by strong exports in December and January and healthy growth in January.

"Perhaps some pay back is to be expected after a dazzling start to the year for the Canadian economy," said BMO Capital Markets economist Robert Kavcic in a note to clients.

February marked the 18th consecutive monthly trade deficit, reflecting the turmoil caused by low oil prices. Export prices dropped by 3.2 percent while volumes declined by 2.2 percent.

Canada will take more than two years to adjust fully to the drop in oil prices, a senior central bank official said last week, signaling no quick end to the shock.

"The air is going out of the balloon to an extent after the supposed optimism that we saw in January," said David Watt, chief economist at HSBC Bank Canada.   Continued...

A tugboat pulling a transport truck on a barge crosses the harbour beside the container port in Vancouver, British Columbia in this file photo dated June 8, 2012.   REUTERS/Andy Clark