OTTAWA (Reuters) - Canadian Finance Minister Jim Flaherty said on Thursday he is concerned by the record high trade deficit Canada had in July and he called on the private sector to step up investment to improve productivity and help support economic growth.
Canada’s monthly trade deficit in July rose more than expected as anemic demand from the United States sapped exports, while imports surged to their highest level since November 2008.
“We are concerned about some weakness in exports,” Flaherty told reporters in Kitchener, Ontario.
The trade shortfall in July came to C$2.74 billion ($2.66 billion), Statistics Canada said, more than triple the deficit of C$810 million that was forecast by analysts in a Reuters poll.
Flaherty said that while he was encouraged by recent data that pointed to a pickup in spending by Canadian businesses, the private sector must keep reinvesting profits to help bolster the sector and the economy.
“We need the private sector to continue to step up, start to invest ... to help create more jobs than we’ve seen in Canada, more investment in machinery and equipment.”
The deeper trade deficit, along with softer-than-expected housing data also released on Thursday, came a day after the Bank of Canada raised its key interest rate by a quarter point to help keep inflation in check.
It was the third straight hike by the bank, bringing its benchmark rate to 1 percent, but the bank also cautioned that a weak U.S. economy would slow down Canada’s recovery.
Flaherty said that Canada’s relatively strong economic performance meant that Canadians should be confident despite global economic uncertainty.
“In a global economy that remains uncertain, Canadians have every reason to be confident. Our country has weathered (the slowdown) ... in far better shape than other major industrialized countries,” he said.
Flaherty added that Canada would cut its overall budget deficit in half by the 2011-12 fiscal year and by two-thirds by 2012-13. Preliminary numbers showed a 2009-10 deficit of C$47 billion ($45.6 billion) but final figures have yet to be released.
Reporting by David Ljunggren and John McCrank; editing by Peter Galloway