Canada’s trade deficit contracts in October, but international trade unlikely to contribute to Q4 GDP growth

Canada’s trade deficit contracted in October from the prior month. The deficit narrowed from a record CAD 4.4 billion in September to CAD 1.1 billion in October. Nominal imports fell 6.4 percent because of a 6.2 percent drop in volumes and 0.1 percent fall in prices. The decline in imports was driven by an exceptionally large shipment that was destined for the Hebron offshore oil project. Nominal trade exports were up 0.5 percent; however, this was because of a 1.2 percent increase in prices and 0.7 percent drop in volumes.

Stripping the one-time delivery, imports would have fallen a smaller 0.3 percent. Imports dropped a range of products, with notable falls in energy products and metals, which fell 7.2 percent and 5.4 percent sequentially.

Growth in export was held up by energy products that rose 2.2 percent and motor vehicles and parts that grew 6.7 percent. However, 2.8 percent drop in consumer goods and 4.2 percent fall in aircraft countered the increase.

The turn in the October trade deficit was unsurprising. However, there is little to show off about in terms of Canada’s trade picture. The fall in export volumes is disappointing and while it is countered by declining imports, it implies that international trade is unlikely to contribute much to economic growth in the December quarter, noted TD Economics in a research report.

“With pressure on the housing market as a source of domestic growth and little traction on exports, the overall economy will continue to struggle”, added TD Economics.