Canadian trade deficit widens in October on energy prices

Canada’s trade deficit widened in October, coming in at CAD 1.17 billion, up from a revised CAD 0.89 billion deficit in September. This is above consensus expectations of a deficit of CAD 0.73 billion. Exports dropped 1.2 percent to CAD 49.3 billion, mainly driven by energy. Imports dropped less drastically by 0.6 percent to CAD 50.5 billion.

In real terms, the picture was considerably better. Volumes of exports rose 1.2 percent, whereas import volumes came in nearly flat on the month.

The fall in exports was mainly due to an energy price story, which led to an overall fall of 2.3 percent in total export prices. Therefore, exports of energy products dropped 12.4 percent in value. This was just partly countered by solid upticks in exports of motor vehicles and parts and food, fishing, and intermediate food products. Excluding energy, exports rose 1.6 percent, with rises throughout 7 of the 11 industries.

Imports dropped for the fourth straight month. This was led by a fall in motor vehicles and parts and industrial, chemical, plastics and rubber products. Canadian merchandise trade surplus with the U.S. narrowed considerably to CAD 3.1 billion in October. Its merchandise trade deficit with nations other than the U.S. narrowed to CAD 4.2 billion.

Today’s result is better than the headline picture suggests. As anticipated, the widening was mainly due to reduced energy prices, due both to increased Canadian differentials for most of the decline, and declining global benchmarks.

“In particular, announced voluntary oil shut-ins in Q4, combined with mandatory curtailments in 2019 are expected to weigh on export volumes going forward”, stated TD Economics.

At 16:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was highly bearish at -110.107, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 2.54751. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex