By Robb M. Stewart
OTTAWA--Canada logged a merchandise-trade deficit with the rest of the world in November, thanks in part to a retreat in oil prices and a stronger Canadian dollar that lowered prices for both exports and imports in local currency terms.
The narrow deficit for the month supports the central bank's expectation that economic growth is stalling into the winter.
The country posted a goods-trade deficit of 41 million Canadian dollars, the equivalent of about $30.4 million, Statistics Canada said Thursday. October's surplus was revised down sharply to C$130 million from the C$1.21 billion reported last month.
Exports dropped 2.3% to C$64.37 billion in December, while imports fell 2.1% to C$64.41 billion, the data agency said.
Energy products exports were 4.7% lower for the month, a fifth consecutive monthly drop led in November by a sharp decline in coal exports to Asian countries and a decline in natural gas shipments with lower prices. Excluding energy products, exports were down 1.5%.
The appreciation of the Canadian dollar in November, following two months of declines in its average value, impacted both import and export values for the month. A large proportion of the country's transactions are completed in U.S. dollars, so when the Canadian currency strengthens against the U.S. dollar converted values in Canadian dollars are lower.
Exports to the U.S., Canada's biggest export market by a wide margin, were down 2.6% and imports edged 0.1% lower. That narrowed Canada's surplus with its neighbor to C$7.30 billion in November from C$8.58 billion the month before.
Exports to countries other than the U.S. decreased 1.3% in November, with a fall in shipments of various products to Japan, lower copper, wheat and pulse crops exports to China and a fall in iron ores and copper ores to South Korea, the agency said.
On the imports side, purchases from abroad fell 5.3%, the biggest fall since January 2022. The decline was led by lower imports from China, which Statistics Canada said coincided with heightened Covid-19 restrictions in China ahead of the shift in policy, and decreases in imports from Belgium and South Korea.
Overall, exports of consumer goods were down 6.3% in November, including a decline in pharmaceutical and medicinal products following a sharp increase in October. Exports of meat products were also down for the month, in part due to a decline in pork exports to Asian counties amid rising exports of pork from the U.S., and exports of motor vehicles and parts fell for a third month in four, Statistics Canada said.
Imports of consumer goods were down in November, after rising the month before, with further drop in pharmaceutical and medicinal products imports. Lower imports were also recorded for metal and non-metallic minerals and aircraft and other transportation equipment and parts.
On a volume, or price-adjusted, basis, exports fell 1.4% in November while imports slipped 0.7%.
When international trade in goods and international trade in services were combined, Canadian exports fell 1.6%, while imports were down 2.1%. As a result, Canada's trade surplus--incorporating both goods and services--widened to about C$1.9 billion in November from C$1.5 billion in October.
The Bank of Canada, which aggressively raised its monetary-policy rate last year in a bid to tame stubbornly high inflation, has forecast economic growth will stall through the first half of this year. It has recently signaled it is either at or near the end of its tightening cycle, after lifting its benchmark rate four percentage points in all to 4.25%.
Recent data from Statistics Canada showed gross domestic product edged up 0.1% in October from the month before, with early indications suggesting GDP in November again ticked up 0.1% month-over-month. The Canadian manufacturing sector remained in mild contraction territory in December with further declines in production and new orders, with the S&P Global Canada Manufacturing Purchasing Managers' Index released earlier this week showing a reading of 49.2 for the month, the fifth successive month below the 50 no-change mark.
Canada's merchandise trade data for the month was weaker than expected, said Stephen Brown, senior economist at Capital Economics. Taken with recent business and consumer surveys, the trade data points to downside risk to the preliminary estimate that GDP edged up in November, he said.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
01-05-23 0951ET
