A truck moves past stacked shipping containers at the Port of Montreal, on May 17, 2021.CHRISTINNE MUSCHI/Reuters
Canada posted a surprise trade deficit of $312-million in December, as exports were dragged down by cars and crude oil while imports edged up due to a record rise in consumer goods, data showed on Wednesday.
This was the first monthly trade deficit since July, Statistics Canada said.
Analysts in a Reuters poll had forecast a $1.1-billion surplus. November’s surplus was downwardly revised to $1.06-billion from $1.57-billion reported initially.
Total exports fell 1.9 per cent in December, the second consecutive decline, while imports were up 0.2 per cent, it said.
Exports were down 0.4 per cent in December in volume terms as the value of the exports were also pulled down by an appreciation of local currency, it said.
The Canadian dollar strengthened 2.4 per cent against its U.S. counterpart in December, its largest gain since June 2023, impacting the value of exports.
The Canadian dollar strengthened 0.1 per cent to 1.3475 per U.S. dollar, or 74.21 U.S. cents.
“That’s certainly going to impact the competitiveness of Canadian foreign sales,” said Stuart Bergman, chief economist at Export Development Canada.
“I would expect to see this weakness persist into the first half,” he said.
Bank of Canada said last month that economic growth is expected to be flat before strengthening gradually around the middle of 2024 and to expand 0.8 per cent compared with 2023.
The fall in total exports was led by an 8.2 per cent drop in exports of motor vehicles and parts, which contributes more than a fifth to Canada’s total exports.
A part of the drop was attributed to the phasing out of production of some car models in Canada, which will be replaced by electric vehicles in future, Statscan said.
A near 7 per cent fall in the price of crude oil also added to the drop, as energy contributes a fourth to total exports.
The rise in total imports, up 0.2 per cent in December, was due to a the strongest monthly increase in consumer goods. Pharmaceutical products was the biggest contributor to consumer goods, though clothing, footwear and accessories also increased.
By volume, total imports rose 1.3 per cent.
The central bank last month kept its policy rate on hold at 5 per cent at a 22-year high, and noted the economy was operating in modest excess supply, but underlying inflation pressures were still persistent.
“We don’t expect net trade to continue to drive growth in early 2024 given deteriorating foreign demand,” Katherine Judge, economist with CIBC wrote in a note.