Canada trade deficit shrinks as non-energy exports post gain

Wed Oct 5, 2016 9:45am EDT
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By David Ljunggren

OTTAWA (Reuters) - Canada's trade deficit in August shrank to its lowest level in eight months on stronger non-energy exports, offering further evidence the economy rebounded strongly in the third quarter.

Statistics Canada on Wednesday said the deficit, the 24th in a row, was C$1.94 billion ($1.47 billion), down from a revised C$2.19 billion shortfall in July and less than the C$2.60 billion forecast by analysts in a Reuters poll.

Exports rose by 0.6 percent on the back of a healthy performance by the consumer goods and metallic products sections. Overall volumes rose by 0.4 percent while prices edged up 0.2 percent.

"I guess we can breathe a sigh of relief because export volumes did rise for a second straight month," said Sal Guatieri, senior economist at BMO Capital Markets.

Analysts have long predicted exports would rise as the Canadian dollar remains weak and the U.S. recovery continues.

The data should please the Bank of Canada, which says non-energy exports are crucial to helping revive an economy hobbled by low oil prices.

"It's a very good performance. It looks like we're getting the turnaround we were forecasting," said Peter Hall, chief economist at Export Development Canada.

The central bank, which had predicted a third-quarter recovery following a devastating May wildfire in Alberta, is due to make its next interest rate announcement on Oct. 19 and Guatieri said the August trade figures reduced the chance of a cut.   Continued...

Wheat from Canada is unloaded from the storage of a freight ship at Chiba Kyodo Silo Co. in Chiba east of Tokyo, November 13, 2015.  REUTERS/Thomas Peter