Canada trade deficit down, surplus with U.S. shrinks

Fri Dec 10, 2010 11:09am EST
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By David Ljunggren

OTTAWA (Reuters) - The Canadian trade deficit was smaller than expected in October, with stronger international exports of industrial goods and materials helping to overcome a shrinking surplus with the United States, by far Canada's largest trading partner.

The deficit in October was C$1.71 billion ($1.69 billion), down from a revised C$2.31 billion in September, Statistics Canada said on Friday. Market analysts had predicted a deficit of C$2.1 billion in October.

In recent months the high Canadian dollar and weak U.S. economy have cut demand in the United States, which as recently as a few months ago was taking around 75 percent of Canada's exports every month.

In October, the trade surplus with the United States was just C$1.13 billion, the smallest since September 1992. The United States took 70.0 percent of Canada's exports, the lowest level since the 69 percent recorded in July 1982.

TD Economics economist Diana Petramala said Canada accounted for just 14 percent of imports bought by the United States, down from almost 20 percent in 2001.

"While we think that this is as low as it can get, the high Canadian dollar will likely constrain exporters from regaining much of the ground lost during the crisis," she noted.

Both the government and the Bank of Canada have highlighted the difficulties posed by the weak U.S. economy.

In New York, Finance Minister Jim Flaherty told Reuters that "we realize our economy won't have substantial recovery without recovery in the United States".   Continued...

<p>Canada's Finance Minister Jim Flaherty arrives at Centre Block on Parliament Hill in Ottawa May 5, 2010. REUTERS/Chris Wattie</p>