OTTAWA/TORONTO (Reuters) - Lower prices for crude oil helped to widen Canada’s current account deficit to its fourth-largest level ever in the final months of last year, underlining economists’ expectations that net exports were a drag on economic growth in the fourth quarter.
The gap widened to C$16.01 billion ($14.42 billion) in the fourth quarter of 2013, Statistics Canada said on Thursday. Still, the deficit was smaller than the C$17.00 billion analysts had forecast and previous deficits were revised lower.
Statscan said the increase in the deficit was mostly because of the trade in goods, with exports down C$876 million and imports up C$509 million. The biggest factor was a C$2.20 billion decline in crude oil exports, mainly because of lower prices.
The Canadian dollar came off its session lows immediately after the report, but the data was offset by investor caution over political tensions in Ukraine, which weighed on the currency. <CAD/>
Economists said the report was in line with their expectations for how overall growth likely shaped up in the fourth quarter. Figures for gross domestic product will be released on Friday.
“While the deterioration in the current account deficit was not as bad as initially feared, it reaffirms our expectation that net exports will weigh on fourth-quarter gross domestic product growth,” Mazen Issa, senior Canada macro strategist at TD Securities in Toronto, said in a note to clients.
The economy likely grew at a 2.4 percent annualized pace in the quarter as weakness in net exports was balanced with decent consumer spending, said Issa.
“Nonetheless, we see some scope for net exports to evolve in a more constructive manner in the year ahead. We have argued that the Canadian dollar will help provide a competitive boost to exports, which will inevitably help the current account deficit improve from the historical lows that it has hovered around for nearly five years.”
The fourth-quarter deficit was the largest since the third quarter of 2012 and the fourth biggest on record. The figures are seasonally adjusted. The year 2013 saw the second-biggest deficit ever, of C$60.70 billion, down a touch from C$62.22 billion in 2012.
The third-quarter deficit was revised down to C$14.80 billion from C$15.47 billion, and the second-quarter gap to C$15.21 billion from C$15.92 billion.
The report points to net trade subtracting about a percentage point from overall fourth-quarter gross domestic product growth, said Nathan Janzen, economist at RBC in Toronto.
Still, that weakness is not expected to be mirrored in overall growth for the quarter, said Janzen, who expects earlier strength in October and November likely offset an expected 0.3 percent weather-related drop in activity in December.
The consensus among economists broadly is for growth to have slowed to an annualized 2.5 percent pace in the fourth quarter from the previous quarter’s 2.7 percent, according to a Reuters poll.
Editing by James Dalgleish