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Canada reports surprise $638-million trade deficit on day of ugly data

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Canada’s merchandise trade balance swung to an unexpected deficit in April as energy exports declined amid refinery shutdowns.

The deficit of $638 million followed a revised surplus of $766 million in March, Statistics Canada said today in Ottawa.

Economists surveyed by Bloomberg forecast a $200 million surplus, based on the median of 19 forecasts.

The Bank of Canada will probably keep the benchmark interest rate at 1% in a decision at 10 a.m. today in Ottawa. Policy makers have said an increase in exports and business investment are needed to bring the economy to full output.

Exports dropped 1.8% to $42.8 billion in April, led by an 11% decline in energy exports to $10.7 billion. Part of the drop was due to refineries closing for maintenance, Statistics Canada said.

Imports rose 1.4% to a record $43.5 billion, led by consumer goods, according to the agency.

The volume of exports declined 0.8% and import volumes rose 1.9%, Statistics Canada said. Volume figures adjust for price changes and can be a better indicator of how trade contributes to economic growth.
The surplus with the U.S. narrowed to $4.3 billion in April from $4.4 billion a month earlier. The deficit with countries other than the U.S. widened to $4.9 billion, as shipments to the European Union dropped 23%. Exports make up about one-third of Canada’s economy, with about three quarters going to the U.S.

Meanwhile, Conference Board of Canada’s Index of Consumer Confidence saw its first decline of the year Wednesday, falling by 2.6 points to 87.3 in May. The drop in confidence was driven by continued worries regarding job prospects, as well as a more pessimistic view of current finances. Consumer confidence increased in the Prairie region and B.C., but declined in Central and Eastern Canada.

In the U.S. futures markets slipped lower on disappointing jobs and trade data.

The U.S. trade deficit widened to its highest level in two years in April as imports hit a record high, suggesting trade could be a drag on second-quarter growth.

The Commerce Department said on Wednesday the trade gap increased 6.9% to $47.2 billion. That was the largest since April 2012 and followed March’s revised $44.2 billion gap.

Economists polled by Reuters had expected the deficit to widen only to $40.8 billion from a previously reported $40.4 billion shortfall.
The trade deficit with the European Union was the largest on record, as was the gap with Germany.

Imports from South Korea also touched a record high, while Chinese imports rose 16.3%.

That pushed up the politically sensitive trade gap with China to $27.3 billion from $20.4 billion in March.
Exports slipped 0.2% to $193.3 billion.

There was more bad news in the U.S. when the ADP National Employment Report showed about 179,000 private sector jobs were added in May, well below the 210,000 that had been expected. April’s job gains were revised loser by 5,000. Investors look to the ADP report to foreshadow key jobs data that will come out Friday.

U.S. data on Wednesday also showed that productivity fell at its sharpest pace in six years in the first quarter as harsh winter weather depressed output, leading to a jump in labor-related production costs.

The Labor Department on Wednesday revised productivity data to show it tumbling at a 3.2% annual rate. That was the biggest drop since the first quarter of 2008. It had initially been reported falling at a 1.7% rate.
The drop in productivity, which mirrored a decline in economic growth during the same period, is likely temporary.


Article Credit: Business.financialpost

Updated 5 Years ago

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