OTTAWA (Reuters) - The Canadian trade deficit was smaller than expected in October, with stronger international exports of industrial goods and materials helping to overcome a shrinking surplus with the United States, by far Canada’s largest trading partner.
The deficit in October was C$1.71 billion ($1.69 billion), down from a revised C$2.31 billion in September, Statistics Canada said on Friday. Market analysts had predicted a deficit of C$2.1 billion in October.
In recent months the high Canadian dollar and weak U.S. economy have cut demand in the United States, which as recently as a few months ago was taking around 75 percent of Canada’s exports every month.
In October, the trade surplus with the United States was just C$1.13 billion, the smallest since September 1992. The United States took 70.0 percent of Canada’s exports, the lowest level since the 69 percent recorded in July 1982.
TD Economics economist Diana Petramala said Canada accounted for just 14 percent of imports bought by the United States, down from almost 20 percent in 2001.
“While we think that this is as low as it can get, the high Canadian dollar will likely constrain exporters from regaining much of the ground lost during the crisis,” she noted.
Both the government and the Bank of Canada have highlighted the difficulties posed by the weak U.S. economy.
In New York, Finance Minister Jim Flaherty told Reuters that “we realize our economy won’t have substantial recovery without recovery in the United States”.
Exports to the rest of the world, excluding the United States, increased by 10.1 percent from September.
Ottawa, stressing the need to diversify its exports, is pressing ahead with plans to negotiate free trade agreements with major nations and trading blocs such as India and the European Union.
Friday’s trade data barely affected the Canadian dollar, which was at C$1.0100 to the U.S. dollar, or 99.01 U.S. cents, at 10:20 a.m. (1520 GMT), up from Thursday’s North American close at C$1.0105 to the U.S. dollar, or 98.96 U.S. cents.
October marked the sixth consecutive month that Canada has run a trade deficit.
Exports rose by 3.1 percent to C$33.77 billion on higher shipments of industrial goods and materials.
Eric Lascelles of TD Securities said he was heartened by the report, while pointing out that copper exports soared by 243 percent. Copper prices are hovering near record highs, in part due to increased Chinese demand and a supply shortage.
“It is worth noting that this category is always volatile, and encounters triple digit adjustments several times each year,” he said.
Imports grew by 1.2 percent to C$35.49 billion, pushed higher by shipments of energy and automotive products.
Reporting by David Ljunggren; editing by Rob Wilson