Canada's trade deficit widens in March; April expected to be worse

OTTAWA (Reuters) - Canada’s trade deficit widened to C$1.41 billion ($1.00 billion) in March as the novel coronavirus pandemic and low demand for oil hit the economy, and April’s shortfall will be worse, Statistics Canada said on Tuesday.

Analysts polled by Reuters had predicted a shortfall of C$2 billion. Statistics Canada revised the February deficit figure to C$894 million from an initial C$983 million.

“This is probably just the start of the decline,” Stephen Tapp, deputy chief economist at Export Development Canada, said in an interview.

“It’s a rough patch of data for Canadian exports that are going to be coming in. The impacts of the COVID-19 lockdowns are starting to show up in earnest now,” Tapp said, referring to the respiratory illness caused by the novel coronavirus.

The pandemic has disrupted global supply chains and forced officials to shutter non-essential businesses and urge people to stay home.

“With a full month of physical distancing policies in place in April, merchandise trade values are expected to decrease more severely next month,” Statscan said in a commentary.

Exports fell by 4.7% and imports dropped by 3.5% in March, both the largest month-on-month declines seen since June 2018, the agency said. In volume terms, March exports dropped 4.8%, while imports were down 5.8%.

Statscan said production stoppages in the auto manufacturing industry lead to the strong declines in exports and imports of motor vehicles and parts. Exports of passenger cars and light trucks slumped 9.8%, while imports fell 6.2%.

Engine and engine part shipments saw even bigger slumps, the agency said, with exports plunging 28.9% and imports sliding 23.0%.

Production stoppages within the automotive industry continued throughout April and into May, Statscan said, so low levels of exports and imports for these products should be expected until production restarts

Canadian exports of energy products fell 7.4% in March, the third straight monthly decline, as global demand for crude oil weakened.

The declines in motor vehicle and parts exports combined with the lower demand for crude also caused a drop in Canadian exports to the United States, Statscan said.

Exports to the United States fell 4.9%, while imports dropped 5.1%. Statscan said Canada’s trade surplus with the United States, the country’s largest trading partner, narrowed slightly to C$3.9 billion in March from C$4.0 billion in February.

Meanwhile, monthly exports of services, declined 7.2%, while imports of services fell 11.5%, the agency said.

Reporting by Kelsey Johnson and David Ljunggren in Ottawa; Editing by Jonathan Oatis and Paul Simao