November 29, 2011 / 2:24 PM / 6 years ago

Higher exports cut third-quarter current account gap

OTTAWA (Reuters) - Canada’s current account deficit shrank by almost 25 percent in the third quarter on higher exports, Statistics Canada data indicated on Tuesday, but was still larger than market forecasts.

<p>People walk in front of the skyline after a rain storm in Toronto, May 23, 2011. REUTERS/Mark Blinch</p>

The deficit fell to C$12.13 billion ($11.78 billion) billion) from a revised C$16.14 billion in the previous quarter. Markets had expected a shortfall of C$11.15 billion.

The overall balance on trade in goods grew to a surplus of C$734 million from a deficit of C$3.51 billion in the second quarter. Exports of goods were up by C$4.68 billion to C$115.21 billion, the highest for three years.

“Overall, the still negative print for the current account even in an environment of accelerating export growth suggests that trade continues to remain a thorn on the Canadian economy’s side, hampered by the legacy of an appreciating currency,” Emanuella Enenajor, economist at CIBC World Markets, said in a note to clients.

“As export growth scales down following the Q3 boom, and import growth tracks more closely to trend, we expect the current account deficit to widen again, leaving the C$ vulnerable to a weakening if portfolio-related investment flows abate in an environment of elevated global uncertainty.”

The goods surplus with the United States dropped to C$10.57 billion from a revised C$11.37 billion on flat exports of automobiles and lower shipments of crude petroleum.

The services deficit slipped slightly to C$6.35 billion from a record high of C$6.54 billion in the second quarter. The deficit on investment income grew to C$5.89 billion from C$5.48 billion as profits on foreign direct investment in Canada rose.

($1=$1.03 Canadian)

Reporting by David Ljunggren; Additional reporting by Claire Sibonney; Editing by James Dalgleish

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