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Home>Canada's Trade Deficit Widens in August on Export Weakness

Canada's Trade Deficit Widens in August on Export Weakness

Canada's Trade Deficit Widens in August on Export Weakness

10/05/2017

 By Paul Vieira 

OTTAWA -- Canada's trade deficit widened in August from the previous month to the fifth-largest on record, as exports fell for a third-consecutive month and are now down on a year-over-year basis.

The deteriorating trade picture in Canada likely strengthens expectations that the Bank of Canada takes a pause this month -- and possibly for the rest of 2017 -- on rate rises after increases in July and September.

Canada's merchandise trade deficit in August stood at a seasonally adjusted 3.41 billion Canadian dollars (about $2.73 billion), Statistics Canada said Thursday, compared with a revised C$2.98 billion shortfall in the previous month.

The August trade deficit was wider than what traders anticipated. According to economists at Royal Bank of Canada, market expectations heading into Thursday's Canada trade report was for a C$2.6 billion shortfall.

Canada's monthly trade data covers the export and import of goods, and doesn't include services.

The disappointing trade report is the latest indicator signaling the Canadian economy has stalled after a stellar 12-month run that was tops among Group of Seven economies. Economic output in July was unchanged from the previous month, bringing an end to eight straight months of gains.

The August trade report also signals recent strength in the Canadian dollar -- especially since June when the Bank of Canada first signaled rate increases were in the offing -- has dampened export activity. Since raising rates in July and September, central-bank officials said they would gauge the economy's response to a stronger currency and other data when crafting rate policy. These remarks have markedly lowered market expectations for another rate increase later this month.

In August, exports fell 1% to C$43.63 billion. Exports have dropped for the three-straight months and are now off 10.6% from May's record level. Excluding energy products, sales of goods abroad fell 1.4%. On a 12-month basis, Canadian exports fell 0.2%, or the first time there has been a year-over-year drop in nearly 12 months.

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