Canada Goods-Trade Deficit Widens in August to C$1.1 Billion — Update

By Robb M. Stewart

OTTAWA--Canada continued to run a trade deficit with the rest of the world in August, with a drop in prices for crude oil and other goods widening the shortfall.

The country posted a merchandise-trade deficit of 1.1 billion Canadian dollars, the equivalent of about US$805.4 million, Statistics Canada said Wednesday.

That was wider than the C$500 million deficit expected by economists, and marked a sixth consecutive monthly deficit after July's trade balance was revised to a deficit of C$287 million from an earlier estimate of a C$684 million surplus. The country has only had two monthly surpluses so far this year.

Goods exports declined for a third month in the last four, dropping 1.0% from the month before to C$64.31 billion, the data agency said. In real, or volume, terms exports nudged up 0.1% for the month, a sign of the dent prices had on trade.

Imports rebounded, edging up 0.3% to C$65.41 billion and after a drop of 1.4% in July. In volume terms, monthly imports rose 0.4%.

Growth in Canada picked up in the first half of the year after stalling in the middle of 2023, but has been soft in recent months as the labor market has struggled and unemployment has continued to rise steadily. Preliminary data collected by Statistics Canada indicated monthly gross domestic product was essentially unchanged in August after expanding 0.2% the month before. A flash estimate of manufacturing trade pointed to a 1.5% fall in August sales from the month before.

The Bank of Canada is widely expected to again lower its policy interest rate later this month in response to the continued easing in inflation, which would mark a fourth successive cut. In June it became the first Group of Seven central bank to offer rate relief.

Exports of energy products was the biggest drag on outbound shipments for the latest month, largely because of the effect of lower crude prices on oil exports.

Exports of forestry products and building and packaging materials fell to the lowest level since July 2023. The agency noted pulp and paper exports fell sharply, more than offsetting increases the previous two months, coinciding with a temporary shutdown of Canada's two major freight rail lines amid a labor dispute.

After declining the previous two months, exports of motor vehicles and parts rose strongly thanks to passenger-car movements and increased production of light trucks. Still, the data showed car and light-truck exports were down 19.9% from the high recorded in October last year, with a continued trend lower in production in Canada.

Exports to the U.S., Canada's biggest export market by a wide margin, were down 4.3%, in part with the fall in shipments of energy products, while imports were up 0.9%. That narrowed Canada's surplus with its neighbor to C$7.97 billion from $10.48 billion the month before.

Exports to countries other than the U.S. increased 10.3% in August, led by shipments of unwrought gold to the U.K., the agency said.

On the imports side, purchases from abroad were up thanks to increased movements of motor vehicles and parts as production of light trucks and sport utility vehicles in the U.S. increased.

Imports of industrial machinery, equipment and parts also increased, but imports of consumer goods fell.

When international trade in goods and international trade in services were combined, Canadian exports were down 0.7%, while imports edged up 0.1%. As a result, Canada's trade deficit incorporating both goods and services widened to C$2.43 billion from C$1.81 billion.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

October 08, 2024 09:32 ET (13:32 GMT)

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