Canada Trade Deficit in September

By Promit Mukherjee
OTTAWA (Reuters) – Canada posted a higher than expected trade deficit of C$1.26 billion ($908 million) in September as a drop in imports failed to offset a fall in exports, data showed on Tuesday.

The September data marked the seventh consecutive monthly trade deficit, primarily due to lower exports to major trading partners, excluding the United States, according to Statistics Canada.

An ongoing digital transition at the Canada Border Services Agency Assessment and Revenue Management has resulted in increased estimation use for September’s data.

Analysts surveyed by Reuters had predicted a deficit of C$800 million. Additionally, Statscan revised the August trade deficit sharply to C$1.47 billion from C$1.1 billion.

The primary contributor to the 0.1% drop in exports was a 5.4% decrease in shipments of metal and non-metallic mineral products, primarily driven by a 15.4% slump in unwrought gold shipments.

Decreased metal and energy prices contributed to the monthly export reduction, with total exported goods prices down by 1.5%, although in volume terms, exports increased by 1.4%.

Inbound shipments fell by 0.4% in September but were largely unchanged in volume. The decline in metal and non-metallic mineral product imports, down 12.7%, was the largest contributor to the overall import drop.

This decline in imports reflects Canada's weak demand environment and sluggish growth prospects, significantly impacted by a 23-year high interest rate prior to reductions initiated by the Bank of Canada since June.

Since then, the BoC has cut its key policy rate in four consecutive meetings to 3.75%. The next monetary policy decision is expected on Dec. 11, with markets estimating a 47% chance of a 50-basis point cut.

The Canadian dollar appreciated by 0.18% to 1.3876 against the U.S. dollar by 1333 GMT, or 72.07 U.S. cents. Yields on two-year government bonds rose 2.89 bps to 3.134%.

Total exports reached C$63.88 billion while imports totaled C$65.14 billion.

Canada's trade surplus with the United States, which comprises over three-quarters of its total exports, rose to C$8.29 billion in September from C$7.82 billion the previous month. Imports from the United States, accounting for 60% of all Canadian imports, increased by 0.8% month-on-month.

> ($1 = 1.3882 Canadian dollars)