Trade surplus shrinks
By TERRY WEBER
Globe and Mail Update
Canada's trade surplus narrowed sharply in September, as exports fell 3.4 per cent with the declines being felt across all commodity groups, Statistics Canada said Wednesday.
For the month, the country's trade surplus with the rest of the world fell to $5.1-billion, from August's downwardly revised $6.4-billion.
Initially, the August surplus had been pegged at $7.4-billion and most economists had expected it to pull back only slightly to about $7-billion.
September's decline, Statscan said, came as exports fell to the United States, Japan and the European Union.
All commodity groups were affected, led by machinery and equipment and agricultural exports. Overall, exports for the month totalled $36.1-billion, down 3.4 per cent from August's levels.
Imports, meanwhile, rose 0.4 per cent in September to $31-billion, with gains in energy products, forestry, industrial goods and consumer goods shipments.
Analysts suggested that Wednesday's trade numbers suggest the Bank of Canada could move to the sidelines in December, a possibility many economists had previously dismissed.
“The BoC's argument upon raising rates Sep 8 — and since — is that the economy is at capacity because the economy has been stronger because exports have been stronger,� RBC Capital Markets senior economist David Wolf said in a note to clients.
“July and August trade numbers challenged that view, today's September report blows it up.�
He also noted that the central bank has been more interested in how the rising Canadian dollar affects the economy, rather than in the movement of the currency itself.
“The evidence here says it's starting to hurt,� Mr. Wolf said.
“These data could easily derail tightening on Dec. 7 — and thereafter, for that matter — a view markets have still not yet come to.�
South of the border, the U.S. trade deficit narrowed more than expected during the same month, with exports hitting a record $97.5-billion (U.S.). Worry about the size of both the trade and budget deficits has hammered the U.S. dollar in recent weeks, although Wednesday's export figure also suggests that the lower greenback is also helping spark demand for U.S. goods in other markets.
In total, the September deficit fell to $51.6-billion, down from a revised August reading of $53.5-billion.
Economists polled by Briefing.com had been expecting the September deficit to come in closer to $54-billion.
Despite the better-than-expected U.S. showing, the greenback continued to suffer on world markets, hitting a record low against the euro. The Canadian dollar, meanwhile, also lost some ground against its U.S. counterpart. Shortly after the release of the two reports, the loonie was trading at 83.36 cents (U.S.), up slightly from Tuesday's closing price but off its early morning highs.
According to Statistics Canada, demand for Canadian goods south of the border continued to fall in September, with exports to the United States — this country's biggest trading partner — declining 2.7 per cent to $29.4-billion.
“At the same time, Canadian purchases from American firms rose only 0.9 per cent,� Statscan said in its monthly report.
“This resulted in a $1-billion decline in Canada's trade surplus with the United States to $7.9 billion.�
Exports to countries other than the United States fell 6.4 per cent to $6.6-billion, while non-U.S. imports edged down to $9.5-billion.
“As a result, Canada's non-U.S. trade deficit widened to $2.8 billion from $2.5 billion in August,� Statscan said
