OTTAWA (Reuters) - Low oil prices helped Canada’s trade deficit to sharply widen to C$649 million ($519 million) in December, but in a more promising sign for the economy, export volumes surged.
The deficit was, however, smaller than the C$1.20 billion shortfall expected by analysts. Statistics Canada’s official release on Thursday also cut November’s deficit to C$335 million from an initial C$644 million, citing a number of revisions.
Overall exports rose by 1.5 percent from November, pushed up by a 13.1 percent jump in shipments of metal and non-metallic products. This helped outweigh a 10.3 percent decline in the value of energy product exports as oil prices dropped.
Canada is a major oil producer and the crude slump is hitting revenues. But lower prices have also dragged down the value of the Canadian dollar, making exports more competitive.
Export volumes leapt by 3.5 percent from November, the largest monthly increase since the 4.3 percent seen in May. In a sign of broader strength, 8 of the 11 sub-sectors posted gains.
“This report helps to allay the doom and gloom that has surrounded the Canadian economy in recent weeks ... while energy will slow the economy down, it will not derail the overall recovery,” said TD Securities strategist Mazen Issa.
Imports grew 2.3 percent, pushed up by a 9.3 percent rise in energy products as a number of refineries returned to full capacity after maintenance.
Both imports and exports grew at the fastest rate since May 2014, when they advanced 3.1 percent and 4.4 percent respectively.
“Low oil prices will continue to weigh on nominal exports but a weaker Canadian dollar and stronger U.S. demand should help export volumes pick up further, with trade expected to make a solid, positive contribution to growth in 2015,” said Josh Nye of RBC Economics.
Shipments to the United States, which took 75.1 percent of all Canadian exports in December, grew 0.6 percent while imports advanced by 0.8 percent. As a result, the trade surplus with the United States edged down to C$3.12 billion from C$3.17 billion in November.
Overall, the value of 2014 imports grew by 7.6 percent from 2013 and exports increased by 10.3 percent. Consequently, Canada posted a C$5.17 billion trade surplus with the world, compared to a C$7.22 billion deficit in 2013.
Editing by Bernadette Baum