MNI DATA ANALYSIS:Canada Dec Trade Gap Widens On Weak Exports>

By Yali N'Diaye

     OTTAWA (MNI) - Canada's goods trade deficit with the world widened 

again in December to C$3.2 billion from C$2.7 billion in November, as 

import growth outpaced export growth, Statistics Canada reported 

Tuesday. 

     Exports were up 0.6% to C$46.5 billion while imports increased 1.5% 

to a record C$49.7 billion. 

     Overall, the nominal trade deficit narrowed to C$7.3 billion in the 

fourth quarter from C$9.0 billion in the third quarter. 

     --DISAPPOINTING EXPORTS 

     While analysts had expected both imports and exports to increase, 

they had expected sales abroad to help narrow the gap. 

     Instead, not only did exports rise just 0.6%, although this was the 

third consecutive increase, but the gain was all price related as 

volumes were flat on the month. 

     In addition, exports to the U.S. contracted 0.8% after a 5.2% gain 

in November. However, with imports down 1.3%, the trade surplus with the 

U.S. widened to C$3.4 billion from C$3.3 billion. 

     Exports to countries other than the U.S. rose 4.9%. But here too, 

exports were outpaced by imports (+6.8%), leading to a widening of the 

gap to C$6.6 billion from C$6.0 billion in November. 

     On a sector basis, a total of 6 of 11 export sections posted 

declines. 

     Export gains were led by energy (+6.2%, with volumes up 1.5%) and 

metal and non-metallic mineral products (+7.7%). Exports excluding 

energy contracted 0.6% after a 3.8% increase in November. 

     In December, the main commodity export groups posted gains. 

     Going forward, the Bank of Canada expects exports of services and 

commodities to "remain solid", while "non-commodity goods exports 

outside the auto sector are expected to grow roughly in line with 

foreign demand," according to the January 17 Monetary Policy Report. 

     December gains were offset by an 8.4% drop in consumer goods (-9.6% 

in volume). 

     --WIDESPREAD IMPORT GAINS 

     On the import front, gains were more widespread, with 9 of 11 

sections posting higher sales abroad. 

     Energy (+16.9%) and machinery, equipment and parts (+6.3%) led the 

advance. 

     The agency pointed out gains in machinery and equipment "preceded 

new emissions regulations affecting off-road diesel engines and 

machines" and effective since January 1, 2018. Equipment not meeting the 

new standards is no longer permitted. 

     Imports of aircraft and other transportation equipment and parts, 

on the other hand, fell 23.4%. 

     -- REAL BALANCE DETERIORATES 

     In the fourth quarter, nominal exports rose 4.6%, only partially 

offsetting the third quarter's 7.6% drop, while imports rose 3.1%. 

     As a result, the trade deficit narrowed to C$7.3 billion from C$9.0 

billion. 

     The nominal picture also improved for 2017 as a whole, with a trade 

gap narrowing to C$24.0 billion from C$25.9 billion in 2016. 

     In real terms, however, Canada's trade position deteriorated. 

     Export volumes edged up 0.3% in the fourth quarter, when imports 

rose 1.2%, leading to a goods trade deficit of C$4.7 billion, widening 

from a C$3.5 billion gap in the third quarter. 

     For 2017, the real trade balance switched to a C$6.7 billion 

deficit from a C$7.6 billion surplus in 2016. 

--MNI Ottawa Bureau; email: yali.ndiaye@marketnews.com 

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