Canadian trade returns to earth 'with a thud' as deficit hits new $3.4B record

OTTAWA – The country’s trade deficit expanded in March to reach its widest gap on record amid a slowdown in exports to the United States, Statistics Canada said Wednesday.

The figures show Canada’s trade deficit with the world grew to $3.4 billion. Closer to home, the trade surplus with the U.S. narrowed 6.3 per cent to hit its lowest level since December 1993.

The March data, which saw exports fall faster than imports, cast doubts on economic growth heading into the second quarter.

“Canada’s trade performance has come back to earth with a thud after the huge strength seen around the turn of the year,” BMO senior economist Benjamin Reitzes wrote in a note to clients.

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

Reitzes underlined “chunky declines” in several export categories: motor vehicles and parts dropped six per cent, metal and non-metallic mineral products slid 5.4 per cent and consumer goods fell 4.6 per cent.

Overall, economists had expected a deficit of $1.4 billion, according to Thomson Reuters.

Statistics Canada also revised the trade deficit for February, bumping the shortfall higher to $2.5 billion compared with the initial reading of $1.9 billion.

The downgraded February number and the record deficit for March are expected to dampen first-quarter economic growth. Economists also predict the data will contribute to a weaker handoff to the second quarter.

“It’s tough to find a silver lining in the March trade data,” said TD senior economist Leslie Preston, who still expected Canada to generate a “robust” real GDP number between 2.5 and three per cent for the first three months of 2016.

“That vigorous pace of growth is unlikely to be sustained in (the second quarter).”

But, in her note to clients, Preston said the recent weakness in the trade picture should be put into perspective as a “breather after a period of inordinate strength.”

She predicted exports to remain an important source of strength over the medium term with the U.S. economy on solid footing and the Canadian dollar expected to remain below 80 cents US over the next couple of years.

Statistics Canada said March exports fell 4.8 per cent to $41.0 billion due to declines in 10 of 11 sectors, while imports sank 2.4 per cent to $44.4 billion.

The trade surplus with the U.S. tightened to $1.5 billion from $2.1 billion in February. Exports to the U.S. slid 6.3 per cent to $30.4 billion in March and imports slipped 4.8 per cent to $28.9 billion, the report said.

Excluding the U.S., the data showed Canada’s trade deficit with the rest of the world increased to $4.9 billion in March compared with $4.6 billion in February.

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