10 July 2009

Canada's trade deficit grows

The following appeared in today's edition of "globeandmail.com".

Canada's trade deficit widened in May to $1.4-billion, its worst showing on record, as exports slumped at a far faster pace than imports, driven lower by the energy and auto sectors.

The trade data reported Friday by Statistics Canada showed the partial impact of a higher dollar on exports, which sank 6.9 per cent as the loonie rose 6.4 per cent against the U.S. currency. Imports fell 3.5 per cent.

The decrease brought exports to their lowest level since the fall of 1998.

“We wonder whether incomplete reporting from custom offices may have been a factor at play here, in which case June's report may show a bounce back,” said TD Securities economics strategist Millan Mulraine. “In any case, the bottom line is simply that the disturbing trend of weaker global trade is continuing to be an albatross around the neck of the Canadian economy.”

The deficit, the measure of trade with the world, widened from $389-million in April.

“Exports and imports declined for the third consecutive month in May and have been trending downwards since July 2008,” the federal statistics gathering agency said.

However, it noted that the erosion in March, April and May was less than the decline through the end of last year and into January.

Export volumes fell 1.4 per cent in May, while prices fell 2.9 per cent. The volume of imports actually rose 1.5 per cent, though prices fell almost 5 per cent as the higher dollar made the costs cheaper.

“Although the declines were widespread across all sectors in May, the continued weakness in global demand for energy products and the restructuring of the automotive industry accounted for more than half the decrease in exports and imports,” the agency said.

Since last July, Statistics Canada said, export volumes have dropped 23.7 per cent while prices have fallen 16.2 per cent. Import volumes have dropped 24.5 per cent, in contrast to prices, which have edged down just 0.1 per cent.

Exports to the United States fell 8.1 per cent in May, largely on auto and oil.