May 3, 2018 / 12:44 PM / a year ago

REFILE-UPDATE 2-Canada racks up record trade deficit, but exports rebound

 (Corrects "us" to "is" in paragraph 4)
    By David Ljunggren
    OTTAWA, May 3 (Reuters) - Canada's trade deficit in goods
jumped to a record high in March on a surge in imports, but
analysts took heart in data showing healthy export growth, a
sign the economy is performing well.
    Statistics Canada said on Thursday that the deficit hit
C$4.14 billion ($3.21 billion) in March, much higher than the
C$2.24 billion shortfall predicted by analysts in a Reuters
poll. The previous record was C$4.13 billion in September 2016.
    After two weak months, exports posted a 3.7 percent gain to
C$47.58 billion on exports of aircraft and other transportation
equipment, in part due to a contract to supply armored vehicles
to Saudi Arabia.
    "This is a tremendous rebound which is very comforting. We
are very happy to see that," said Peter Hall, chief economist at
Export Development Canada.
    Wheat shipments jumped by 51.9 percent after a sharp fall in
February amid rail transportation disruptions.
    Imports grew by 6.0 percent to a record C$51.72 billion on
increased shipments of motor vehicles and parts - in particular,
passenger cars and light trucks - as well as consumer goods. In
volume terms, imports rose 5.3 percent.
    The Canadian dollar slipped to C$1.2870 to the U.S. dollar,
or 77.70 U.S. cents, from C$1.2840, or 77.88 U.S. cents before
the data were released.
    Royce Mendes of CIBC Economics said the data though should
not be written off as bad news.
    "This report actually seems like good news from a GDP
perspective given what it implies for domestic demand," he said
in a note to clients.
    The Bank of Canada, which has long fretted about the
sluggish performance of Canadian exporters, says the sector
could be hit by uncertainty over the future of the North
American Free Trade Agreement. Canada sent 73.4 percent of all
goods exports to the United States in March.
    The central bank, which has raised interest rates three
times since last July, says it will look closely at domestic
data before deciding when to hike again.
    "I would say on balance they would see the strength in
imports and exports as being more important than the
deterioration in trade," said Doug Porter, chief economist at
BMO Capital Markets.
    Exports to the United States rose 1.2 percent while imports
increased by 3.1 percent. As a result, the trade surplus with
the United States shrank to C$1.68 billion from C$2.28 billion
in February.
    ($1=$1.29 Canadian)

 (Additional reporting by Fergal Smith in Toronto;
Editing by Nick Zieminski)
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