MNI DATA IMPACT: Canada Trade Gap -C$1.5B Vs Forecast -C$0.7B>

By Greg Quinn and Anahita Alinejad

     Ottawa (MNI) - Canada's trade deficit was twice as large as 

economists predicted in January as auto production crumbled following 

the closure of GM's largest local factory, while a modest February 

employment gain will do little to prevent the BOC from cutting interest 

rates again. 

     The trade deficit widened to C$1.5 billion from C$0.7 billion in 

December, while the MNI economist median called for a C$0.7 billion 

shortfall. 

     Exports fell 2% to C$48.1 billion, the fastest pace since June and 

the lowest dollar value since February 2019. Exports have declined in 

four of the last five months. After adjusting for price swings, the 

volume of shipments abroad was even worse, falling 3.1% in January.

     Import figures showed weaker Canadian demand. They dropped the most 

in a decade in January from a year earlier with a 4.9% decline, 

reaching C$49.6 billion. Both imports and exports have slid from a 

recent peak of around C$52 billion. 

     Trade with China -- Canada's second-biggest trade partner -- also 

tumbled as the coronavirus outbreak emerged. Canada's exports to China 

extended a six-month slide with a 7.8% reduction, and imports from China 

fell 12% to a three-year low. 

     The Bank of Canada cut its benchmark interest rate by the most 

since the global financial crisis on Wednesday and said it's prepared to 

do more to sustain demand amid the COVID-19 outbreak. Governor Stephen 

Poloz said Thursday weakness that began in the fourth quarter of last 

year will now likely extend into the second quarter.  

     The BOC cut rates by 50bps to 1.25% even as the labor market 

remained resilient, so Statistics Canada's other report Friday that 

employment climbed by 30,300 in February may make little difference to 

what they do at the next meeting in April. The jobless rate climbed to 

5.6% from 5.5% as more people entered the labor force, though the rate 

remains close to the lowest in records back to the 1970s. 

--MNI Ottawa Bureau; +1-613-314-9647; greg.quinn@marketnews.com

[TOPICS: M$C$$$,MACDS$,MAUDR$]