Current account deficit drops from peak

Thu Mar 1, 2012 2:30pm EST
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By David Ljunggren

OTTAWA (Reuters) - Canada's current account deficit in 2011 dropped slightly from the record set in 2010 and is shrinking in proportion to gross domestic product, indicating the worst of the economic crisis may be over.

The deficit for the year fell to C$48.30 billion ($48.79 billion), the second highest on record after 2010's C$50.86 billion, Statistics Canada said on Thursday.

The 2011 deficit represents 2.8 percent of gross domestic product compared with 3.1 percent in 2010. It was the third consecutive annual deficit after a decade of surpluses.

The deficit for the fourth quarter of 2011 shrank by 16 percent to C$10.33 billion on higher exports to the crucial U.S. market, which is finally showing signs of recovery.

The figure, higher than C$9.40 billion shortfall expected by analysts, represents about 2.4 percent of GDP, down from the 2.9 percent seen in the third quarter.

"The improvement in the goods balance is consistent with a stronger than expected growth outturn in the U.S. economy through the end of 2011. We anticipate this momentum will carry over into 2012 and will bleed into Canadian growth," said TD Securities strategist David Tulk.

The overall balance on trade in goods in the fourth quarter jumped to C$3.13 billion from C$248 million. Exports of goods were up by C$6.68 billion to C$121.47 billion, the highest since the third quarter of 2008.

The services deficit edged up by C$60 million to C$6.16 billion on a lower commercial services surplus and a higher transportation deficit. The investment income deficit widened to a three-year high.   Continued...