Canada 2016 trade deficit widens despite year-end uptick

Posted February 08, 2017

Although exports rose by 0.8 per cent in December, volumes actually fell by 1.4 per cent.

The Canadian trade account recorded a second successive monthly surplus for December at C$0.92bn.

Canada recorded a surplus of C$923 million ($700 million) in December, Statistics Canada said in Ottawa, after a revised C$1.01 billion November surplus.

Coming on the heels of another trade surplus in November, "That's back-to-back surpluses totalling just under $2 bln, the most in almost three years", BMO economist Jennifer Lee said.

"This wasn't a good news story in the most recent month. the feed through to December real GDP from these data will be on the soft side", said Avery Shenfeld of CIBC Economics.

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Exports of energy products jumped by 15.9 percent on the month to the highest value since November 2014.

Peter Hall, chief economist at Export Development Canada, noted there was no sign of a let-up in USA demand for autos and said overall he was pleased with the trade data.

But the gain in energy prices hid some troubling weakness in non-energy exports, economists said.

Last month, the central bank said "prospective protectionist trade measures in the United States would have material consequences for Canadian investment and exports".

Exports to countries other than the U.S. increased 2.6% in December to a fresh record high and the trade deficit narrowed to C$3.5bn from C$3.7bn previously. Volumes rose by 0.4 percent. Meanwhile, imports increased one dollar to $45.5 billion in December, due in large part to imports of aircraft and industrial machinery. So on an annual basis, Canada posted a trade deficit of $26.1 billion in 2016, an increase of more than $3 billion from 2015's level. In this context, the data overall is positive for the Canadian currency.