Canada’s trade deficit widens despite pickup in exports to the U.S.

To recap:

• Canada’s trade deficit widened to to $567 million in April from $3 million the prior month, Statistics Canada said today.
• The March trade balance was revised down, from a surplus of $24 million to nearly flat (-$3 million).
• With April’s reading, Canada has recorded a trade deficit for 16 consecutive months.
• In terms of volumes, exports were up 0.5 per cent but that was offset by a price decline of 0.7 per cent, which amounted to a 0.2 per cent dip. This broke a four-month streak of increases. Exports were the main contributor to Canada’s 2.5 per cent GDP growth between January and March.
• Imports grew to a record high of $40.8 billion, the fourth consecutive month of growth.
• Canada’s trade surplus with the U.S. widened, even though imports from south of the border grew slightly faster than exports heading south. Canadian exports to the U.S. climbed 1.8 per cent to $30.1 billion, while imports from Uncle Sam rose 1.9 per cent to a record high of $26.2 billion.
• Despite that, Canada’s overall trade balance was back in the red, due to a drop in exports to countries other than the U.S. These fell by a whopping 5.6 per cent to $10.2 billion, while Canadian imports remained virtually unchanged.

What the analysts are saying:

• The widening of the deficit in April coincided with an appreciation of the loonie, writes TD’s Jonathan Bendiner, but the bank expects the Canadian dollar to weaken later in 2013, which should help exporters.
• The return to a trade deficit was disappointing, writes CIBC’s Emanuella Enenajor, but “the impact on GDP may not be as bad” since both exports and imports rose in terms of volume.
• RBC’s Paul Ferley sounds more pessimistic. Net exports, he writes, are the main reason why the bank expect GDP growth to slow to 2.1 per cent between April and June from 2.5 per cent between January and March.