UPDATE 2-Canada posts near-record trade deficit, imports and exports drop

Wed Jun 3, 2015 10:28am EDT
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(Adds reaction, details, Canadian dollar weakening)

By David Ljunggren

OTTAWA, June 3 (Reuters) - Canada posted a near-record trade deficit of C$2.97 billion ($2.40 billion) in April as both imports and exports fell in another sign of challenges facing the economy, Statistics Canada data showed on Wednesday.

Traders had expected a shortfall of C$2.10 billion. The deficit, the seventh in a row, was the second largest on record after the C$3.85 billion recorded in March.

Canada is a major energy exporter and the economy, which has been hit by the sharp drop in oil prices over the past year, experienced its biggest contraction in nearly six years in the first quarter.

The government and the Bank of Canada are confident that the economy should improve as the effects of the oil shock wear off and the U.S. economy rebounds from its own first-quarter contraction.

Canada's central bank says the recovery depends in part on non-energy exports, which were a disappointment in April. Overall exports fell by 0.7 percent, the fourth straight monthly decline, pulled down in part by a 6.0 percent plunge in consumer goods.

The value of energy product exports grew 5.9 percent as an 8.3 percent rise in volumes outweighed a 2.2 percent drop in prices.

The Bank of Canada, which cut interest rates in January and has since left them unchanged, is due to make its next rate announcement in July. Markets do not expect another cut.   Continued...