Canada’s trade deficit grows despite lower loonie

Canada’s trade deficit grew to a record $3.4 billion in March even as a cheaper Canadian dollar should have made Canadian products and services more appealing to foreign buyers.

Statistics Canada, the country’s data analysis agency, reported that Canada’s exports fell 4.8 per cent to $41.0 billion in March. Export volumes were down 2.9 per cent and prices fell 2.0 cent. Imports declined 2.4 per cent to $44.4 billion, driving Canada’s trade deficit with the world from $2.5 billion in February to a record $3.4 billion in March.

“Export volumes are now back down to where they were in November,” Scotiabank’s economics team said in a note early Wednesday.

Worrying signs

Bank of Montreal economist Benjamin Reitzes also saw little reason for optimism in the numbers.

Exports decreased in 10 of 11 sections, led by motor vehicles and parts, consumer goods, and metal and non-metallic mineral products, said the StatsCan report.

“The details were absolutely terrible, consistent with the headline, as exports dove 4.8 per cent, with every category lower except aerospace,” Reitzes said.

A drop in imports of consumer goods and aircraft and other transportation equipment and parts was partially offset by higher imports of energy products.

Declining surplus with the U.S.

Much of the deficit came from a trade imbalance with Canada’s largest trading partner, the U.S., but also with the rest of the world.

Typically, Canada exports a lot more to the U.S. than it imports. But Canada’s trade surplus with the United States narrowed to $1.5 billion in March, the lowest surplus since December 1993.

Exports to the U.S. fell 6.3 per cent to $30.4 billion in March, while imports slipped 4.8 per cent to $28.9 billion.

Canada’s trade deficit with countries other than the United States increased to $4.9 billion in March compared with $4.6 billion in February.