Current account narrows in third quarter

Fri Nov 28, 2008 1:53pm EST
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By Louise Egan

OTTAWA (Reuters) - Canada posted a current account surplus in the third quarter for what analysts expect to be the last time in a while as exports sagged and domestic companies earned lower profits on their investments abroad.

Statistics Canada said on Friday the surplus narrowed to C$5.64 billion ($4.55 billion) from C$8.21 billion in the second quarter. Analysts had forecast a surplus of C$5.1 billion.

A separate report by Statscan on industrial and raw materials prices showed the weaker Canadian dollar was mitigating potential deflationary pressure in October.

Economists predicted the worsening U.S. and global economic downturn and tumbling commodity prices would drive the current account surplus into the red in coming quarters.

"Canada managed to grind out another current account surplus, but this will likely be the last hurrah on our external balance," Krishen Rangasamy, an economist at CIBC World Markets said in a note.

Sky-high commodity prices earlier in the year compensated for the weaker volumes. But prices for oil and metals have since tumbled in the global economic slowdown.

"We look for the current account to struggle to stay in the black in Q4, and expect a C$10 billion deficit (or more) in 2009," said Doug Porter, deputy chief economist at BMO Capital Markets.

The Canadian dollar fell on Friday but the focus was not on the economic data but a political crisis sparked by the Conservative government's fiscal and economic report on Thursday.   Continued...