Current account turns to deficit in Q3: StatsCan

Canada’s current account balance fell into a deficit in the third quarter, as the goods surplus declined and the services and investment income deficits widened, according to new data from Statistics Canada.

On a seasonally adjusted basis, the current account recorded a $11.1-billion deficit in the third quarter, following quarterly surpluses in the first half of 2022.

“Canada’s current account balance returned to a moderate deficit as a smaller goods trade surplus was more than offset by widening deficits in services trade and investment income,” said BMO Economics in a research note.

Foreign direct investment outpaced direct investment in Canada, producing a $12.9-billion net outflow in the third quarter, StatsCan said.

Additionally, the trade in goods and services swung to a $4.0-billion deficit in the third quarter after a $5.9-billion surplus in the second quarter, as exports declined.

Goods exports were down by $7.0 billion in the third quarter, led by a $4.2-billion drop in energy exports due to a 16.1% decline in prices.

Additionally, the trade in services deficit rose by $1.2 billion to $5.7 billion in the third quarter. StatsCan said the services deficit increased for the seventh consecutive quarter, led by increased foreign travel.

The deficit in investment income also rose by $3.0 billion to $4.2 billion in the third quarter, as interest rates rose.

“Earnings of foreign investors on their holdings of Canadian securities increased by $2.4 billion to a record-high $20.3 billion, on higher payments of both interest and dividends,” StatsCan reported.

At the same time, foreign investors increased their holdings of Canadian bonds (primarily corporate bonds), while shedding equities and monetary market securities.

Overall, investors acquired $19.6 billion of Canadian securities in the third quarter, up from $7.6 billion in the previous quarter.

BMO said that it expects deficits to “persist into 2023 as trade and income flows return to more normal patterns.”

Staff

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