By Robb M. Stewart
OTTAWA--Canada swung to its first goods-trade deficit in five months at the end of last year as the local currency strengthened against the U.S. dollar and exports to its closest neighbor continued to falter.
The shift left trade for the year essentially balanced between a drop in exports and rise in imports, and swung Canada to a slight deficit for 2023.
The country posted a merchandise-trade deficit in December of 312 million Canadian dollars, the equivalent of about $231 million, Statistics Canada said Wednesday. That was much weaker than the C$1 billion surplus expected by economists.
Surpluses in October and November were each revised down by more than C$500 million, to C$1.06 billion and C$2.64 billion, respectively.
Goods exports were down 1.9% to C$64.07 billion in the latest month, while imports edged up 0.2% to C$64.39 billion, the data agency said.
The Canadian dollar appreciated against its U.S. counterpart in December, lowering the value of monthly trade when the large proportion of transactions completed in U.S. dollars is converted. In U.S. dollars, Canadian exports ticked up 0.1% for the month and imports advanced 2.3%.
Lower prices for crude oil in the final two months of last year weighed on energy exports, which fell 3.1% on-month in December. Still, in price-adjusted, or volume terms, crude exports were up for a fifth consecutive month following an increase in oil production in the province of Alberta during the fall following the completion of maintenance work at some facilities.
Exports of motor vehicles and parts also was down, declining 8.2% for the month, which the data agency said was in part due to a gradual slowdown in the production of certain models that will soon no longer be made in Canada or will be manufactured at other Canadian plants. Despite the fall, exports of vehicles and parts jumped 26.2% in 2023.
On the imports side, purchases from abroad in December were buoyed in part by consumer goods, which saw the strongest month increase on record with a jump of 9.4%, driven by a rise in high-value imports from the U.S. in a month when Canada usually posts declines.
Imports of clothing, footwear and accessories, miscellaneous goods and supplies and alcoholic beverages also saw strong gains for the month.
Exports to the U.S., Canada's biggest export market by a wide margin, were down for a third straight month with a drop of 3.4%, while imports were increased 0.7%. That narrowed Canada's surplus with its neighbor to C$9.22 billion from C$11.20 billion the month before.
Exports to countries other than the U.S. increased 3.3% in December, and imports were down 0.6%, the agency said.
For the final quarter of 2023, exports increased 1.6% overall, building on gains the quarter before and again driven by shipments of energy products, while imports were up 0.2%. Excluding energy products, exports edged up 0.3% for the fourth quarter.
Over the full year, imports climbed 1.4% but exports decreased 1.4%. That left the country with a goods-trade deficit of C$1.43 billion after a surplus in 2022 of C$19.71 billion. Canada recorded trade deficits each year from 2015 through 2020.
The Bank of Canada expects economic growth, which stalled in the middle of 2023, to remain flat in the near term even as tightness in some parts of the economy, particularly housing, continues to hold inflation up.
In comments made to lawmakers last week, central bank Gov. Tiff Macklem said that while growth in the last quarter of 2023 is likely to be stronger than the Bank of Canada's official projection of no growth, it is still likely to be fairly weak. Industry-level gross domestic product rose in November for the first time in six months and early indications suggest that growth picked up in December, which would indicate an expansion for the economy in the fourth-quarter on an annualized basis following a modest contraction in the third quarter.
When international trade in goods and international trade in services for December were combined, Canadian exports fell 1.3%, while imports rose 0.2%. As a result, Canada's trade surplus incorporating both goods and services moved to a deficit of C$1.02 billion from a modest C$173 million surplus in November.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
02-07-24 0856ET
