OTTAWA (Reuters) - The retreat of oil prices helped push Canada’s trade deficit to near a two-year high in November, signaling the challenges that cheaper crude pose for the petroleum-exporting nation.
Statistics Canada reported on Wednesday that the November deficit jumped to C$644 million ($546 million) from a deficit of C$327 million in October, much higher than the C$300 million shortfall forecast by analysts.
Exports dropped by 3.5 percent, in part due to a 7.8 percent fall in the value of energy shipments. Benchmark prices for crude have halved over the past six months.
“The trade deficit is likely to worsen materially due to the steep drop in energy prices, suggesting it will be some time before we see another surplus,” BMO Capital Markets economist Benjamin Reitzes said in a note to clients.
Energy was not the only underperformer since nine of 11 export sectors tracked by Statscan recorded declines. Overall prices fell 1.9 percent, while volumes were down 1.6 percent.
The value of imports shrank by 2.7 percent on broad-based weakness.
The Bank of Canada - which says it will not raise its key interest rate from a near-record low of 1.0 percent until the economy shows signs of durable strength - has long fretted over the struggling export sector.
The bank is due to release updated economic forecasts on Jan. 21 and TD Securities strategist Mazen Issa predicted the trade figures would help ensure Governor Stephen Poloz maintains a cautious tone.
“This was an ugly report with widespread weakness,” he said in a note to clients.
The overall drop in exports from October was the largest month-on-month decline since the 3.8 percent retreat in January 2012.
Shipments to the United States, which took 75.9 percent of all Canadian exports in November, fell by 2.6 percent, while imports decreased by 2.1 percent. As a result, the trade surplus with the United States dropped to C$2.94 billion from C$3.18 billion in October.
Although policymakers in Ottawa are optimistic the U.S. recovery will lift the Canadian economy, Export Development Canada chief economist Peter Hall said there was little sign of that in November.
“It’s unsettling but it’s not time to push the panic button,” he told Reuters, saying there was no sign of long-term deterioration in the U.S. recovery.
Statscan initially recorded a small surplus for October but revised that to a deficit to reflect late-arriving data.
Reporting by David Ljunggren; Editing by W Simon; and Peter Galloway