By: Business Financial Post
Canada’s exports grew for the first time in four months in November, cutting the trade deficit in a sign the country’s weak currency is helping manufacturers even as the price of oil slides.
Statistics Canada said on Wednesday the deficit narrowed to $1.99 billion from C2.49 billion in October. Analysts polled by Reuters had forecast a shortfall of $2.60 billion.
Overall exports grew by 0.4 per cent to $43.25 billion, pushed up by shipments of motor vehicles and parts, metal ores and forestry products. Energy exports slumped by 6.6 per cent to hit their lowest since May 2009.
November marked the 15th consecutive monthly trade deficit, reflecting the continuing economic damage caused by low oil prices that have helped drag the Canadian dollar down to a 12-year low.
The weak currency, though, can help exporters by making their products more competitive.
“The main reason we are seeing Canada’s trade balance improve despite the slaughter of commodity prices … is the weak Canadian dollar,” said Sal Guatieri, a senior economist at BMO Capital Markets.
Guatieri, speaking by phone, said the struggling economy should benefit from the weak currency and continued growth in U.S. demand.
In a sign of continued challenges, imports fell by 0.7 per cent in November, with the largest declines in electronic and electrical equipment and parts and energy products.
Some in the market are speculating that the Bank of Canada could cut rates at its next announcement on Jan. 20.
Exports to the United States, which accounted for 75.2 per cent of Canada’s global total in November, rose by 1.3 per cent while imports slipped by 0.1 per cent.
As a result, Canada’s trade surplus with the United States grew to $2.11 billion from $1.68 billion in October.
Export Development Canada chief economist Peter Hall said he expected energy prices to stay weak but noted stronger performances by the Canadian forestry and auto sectors on the back of increased U.S. demand.
“They’re capitalizing on the best news story in the entire world and that is that revival of the American economy,” he said.
The drop in oil prices is one reason why Canada is on track to post its largest ever annual trade deficit in 2015.
For the first 11 months of the year the shortfall was a record $22.84 billion, far ahead of the previous record for the January-November period of $12.89 billion in 2012.