Canada’s trade balance took a sharp turn for the worse in February, as the recently high-flying exports were knocked back down to earth by a sluggish U.S. economy.
Statistics Canada reported that the Canadian trade deficit swelled to $1.9-billion in February, the biggest in four months and triple the size of January’s $628-million shortfall. Exports tumbled 5.4 per cent, on a combination of lower prices and a 2.2-per-cent drop in volumes. Imports also declined by 2.6 per cent, again on lower prices as well as a volume drop of 1.2 per cent, suggesting that demand at home was weak in the month, too.
Economists had expected some deterioration in the trade numbers in February, after three straight months of strong export gains that had helped slash more than $1.6-billion off the deficit, as U.S. economic data had indicated that activity south of the border had hit a soft patch. But the drop in exports was much more dramatic than they had anticipated. As a result, the February deficit was roughly double what economists, on average, had predicted.
Statscan said the export slump was driven by sharp declines in consumer goods, energy products and the auto sector. Exports to the U.S. market, which accounts for three-quarters of Canada’s exports, were down 5.6 per cent in the month.