Canada: Trade deficit deterioration continues - NBF

Jocelyn Paquet, analyst at National Bank Financial, points out that Canada’s trade deficit deteriorated for a third time in four months in November, even as imports retraced, but exports slumped even more, causing the widening of the overall goods deficit.

Key Quotes

“Since August, total exports are down a cumulative 4.3%. That is hardly surprising considering the plunge in oil prices over the same period which led nominal exports of crude oil to sink 27.4%.”

“Lower prices for our energy exports are also largely responsible for less advantageous terms of trade. But why is it that sinking energy prices have not affected nominal imports in the same proportion as nominal exports? The discrepancy highlights the specific problems faced by the Canadian energy sector, notably a shortage of pipeline capacity and mounting inventories.”

“The situation is likely to get worse before it gets better as benchmark oil prices continued to slide in December. Looking further ahead, the planned cuts in oil production in Alberta, which took effect in January, are likely to weigh on Canada’s trade balance. So, expect more red ink in the upcoming trade reports.”