Canada’s trade deficit narrows to $4.2B in January

Statistics Canada says the country’s merchandise trade deficit narrowed to $4.2 billion in January as higher oil prices helped exports rise faster than imports.

The result followed a revised deficit of $4.8 billion for December compared with an initial reading of a deficit of $4.6 billion for the final month of 2018.

Economists had expected a deficit of $3.5 billion for January, according to Thomson Reuters Eikon.

In a report, Royce Mendes, CIBC director and senior economist, described the narrowing trade deficit as “only modest,” and as a reading that “won’t do anything to inspire hopes for a rebound in the Canadian economy.”

Still, the monthly increase in exports was enough for National Bank to increase its forecast for first-quarter GDP to 0.96% from 0.83%. Statistics Canada said total exports rose 2.9% to $47.6 billion in January, the first increase since July 2018. Excluding energy products, exports rose 1.2% in January.

Meanwhile, total imports rose 1.5% to a record $51.8 billion in January, boosted by imports of aircraft and other transportation equipment and parts, which rose 52.6% to a record $2.7 billion due to higher imports of airliners from the United States.

Also released today, the payroll survey showed a “substantial” pickup in hiring in January, Mendes said, with non-farm payroll employees increasing by about 71,000 during the month on the back of broad-based gains across categories.

Overall, Mendes said today’s trade deficit and payroll data were a “mixed bag,” indicative of an economy that is “clearly slowing down, but also not on the precipice of a recession given the trends in employment.”

He added that Canada’s persistent trade deficit suggests that the Canadian dollar will likely need to weaken over the medium term.

Staff, with files from The Canadian Press

The Canadian Press is a national news agency headquartered in Toronto and founded in 1917.