OTTAWA – Canada’s trade deficit narrowed to $2.9 billion in April, helped by higher energy prices, however the result fell short of expectations for the first month of what is expected to be a weak second quarter for the economy.
CIBC economist Nick Exarhos said exports rebounded, but not as much as was expected.
“We got a bounce, but it was an underwhelming bounce if we have to be honest,” Exarhos said.
“There were some signs that some external demand was firming for Canadian exports, but with volumes up under one per cent, I don’t think April is likely to recoup all of the lost ground that the Canadian economy suffered in March.”
The trade deficit for April compared with a revised shortfall of $3.2 billion for March. Initial estimates last month had put the March deficit at $3.4 billion.
For April, economists had expected a deficit of $2.45 billion, according to Thomson Reuters.
The trade report followed a weaker-than-expected report on economic growth in the first quarter ended March 31.
The GDP report suggested a weak hand-off to the second quarter. The economy grew at an annual pace of 2.4 per cent in the first three months of the year, but that was due entirely to strength in January as it contracted in both February and March.
The weak end to the first quarter compounds the difficulties for the economy caused by the Alberta wildfires, which the Bank of Canada has estimated will cut 1.25 percentage points off growth in the second quarter, implying a contraction for the three-month period ending June 30.
Statistics Canada reported Friday that exports increased 1.5 per cent to $41.8 billion in April as prices climbed 1.1 per cent and volumes rose 0.5 per cent.
The gain came as exports of energy products rose 7.6 per cent to $5.0 billion in April. Energy prices gained 9.7 per cent, but volumes fell 1.9 per cent.
David Madani, senior Canada economist at Capital Economics, said there could be a further drop in volumes for May because of the disruption in the oilsands production due to last month’s wildfires.
“This could mean that exports overall actually fell back last month, compounding matters somewhat,” Madani wrote in a note to clients.
Excluding energy products, Statistics Canada said exports gained 0.8 per cent.
Exports of industrial machinery, equipment and parts rose 10.5 per cent to $2.8 billion, while metal and non-metallic mineral products gained 5.7 per cent to $4.8 billion.
Imports increased 0.9 per cent to $44.7 billion, as volumes gained 0.8 per cent and prices added 0.1 per cent.
Imports of aircraft and other transportation equipment and parts rose 52.0 per cent to a record $2.2 billion in April, while imports of energy products rose 5.9 per cent to $1.7 billion in April.
Canada’s trade surplus with the United States narrowed to $1.6 billion in April compared with $1.7 billion in March, while the trade deficit with the rest of the world narrowed to $4.5 billion compared with $4.9 billion the previous month.