May 9, 2019 / 1:11 PM / a year ago

WRAPUP 1-Canada trade deficit shrinks slightly in March, still 12th largest on record

OTTAWA, May 9 (Reuters) - Canada’s trade deficit in March shrank slightly to C$3.21 billion ($2.38 billion) but was still the 12th largest on record, Statistics Canada said on Thursday, underscoring the headwinds still facing exporters.

Analysts in a Reuters poll had forecast a shortfall of C$2.45 billion. Statscan revised February’s deficit sharply upward to C$3.42 billion from an initial C$2.90 billion.

Slumping oil prices, increased energy output from the United States and a shift away from producing light trucks have hit Canada hard in recent years. The country has posted just two trade surpluses since October 2014.

Exports grew by 3.2 percent with shipments of energy products posting a 7.7 percent gain on the back of increased volumes. Exports of passenger cars and light trucks rebounded by 8.4 percent after dropping in February on lower auto output.

In all, nine of 11 export sectors posted gains, which Export Development Chief Economist Peter Hall described as a relief.

“At least it’s a positive trend,” he said in a phone interview, also noting continued strength in exports of industrial machinery and electrical equipment and parts.

Markets took a more sober view and the Canadian dollar held to a near-two-week low of C$1.3496 to the U.S. dollar, or 74.10 U.S. cents.

Imports increased by 2.5 percent to a record C$52.26 billion as imports of consumer goods such as clothing, footwear and accessories rose by 6.7 percent. Imports of airliners plunged by 50.7 percent on a slowdown in deliveries of U.S. aircraft.

Canada’s trade deficit with the world in the first quarter rose to C$10.13 billion, the highest shortfall since the second quarter of 2016.

Royce Mendes of CIBC Economics said that although export volumes had dipped by around 2.5 percent in the first quarter, “the strength in trade in March is a positive for the handoff to the second quarter.”

Canada sent 74.2 percent of all its goods exports to the United States in March. Exports to the United States rose by 1.3 percent while imports shrank by 0.4 percent and as a result, the bilateral trade surplus grew to C$3.62 billion from C$2.99 billion in February.

Separately, Statscan said new housing prices were unchanged in March for the seventh month out of eight, with little or no growth in the major markets of Toronto and Vancouver.

Reporting by David Ljunggren; Editing by Bernadette Baum

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