OTTAWA – The global slowdown hit Canada’s export-oriented economy hard, driving the country’s trade deficit to $1.96 billion in November, the third worst result in history in nominal terms.
The size of the deficit was far bigger than the $600 million forecast by analysts and well above an upwardly revised $552 million shortfall in October.
The picture was even drabber in the United States, which saw it’s trade deficit expand by 15.8 per cent to $48.7 billion in during the month.
Economists said Canada’s trade imbalance all but confirms the economy had another weak quarter in the last three months of 2012, with some saying it could approach one per cent, about half the natural cruising speed.
The Bank of Canada had pencilled in a 2.5 per cent advance for the final quarter of last year, but in a speech Thursday, senior deputy governor Tiff Macklem suggested that figure will be revised downward later this month when the central bank issues a fresh analysis of the global and Canadian economies.
“It is a setback,” said Export Development Canada chief economist Peter Hall of the trade performance.
“But let’s face it, given all that was going on at the time — the uncertainty around fiscal cliff (in the U.S.), hurricane Sandy … and there was that (global) summer slowdown as well — it’s not surprising.”
For the first 11 months of 2012, exports were down 10 per cent from the recent cycle peak of December 2011.
“There was a global growth slowdown in 2012, (and) it also hit us through the channel of commodity prices,” said TD Bank economist Leslie Preston, noting that prices for oil and other natural resources Canada sells the world have declined or gone sideways since about April.
“We do expect exports to strengthen, but that will likely await the second half of 2013,” she added.
Some analysts pointed to positives in the report. Exports in volume terms edged up by 0.1 per cent — a gain wiped out by price effects — and imports surged 2.2 per cent to $39.5 billion, an indication that Canada’s domestic economy was healthy. As well, exports to Canada’s largest trading partner, the U.S., rose 3.9 per cent to $28.3 billion.
The big fall-off was in exports to the rest of the world, particularly recession-laden Europe, which plummeted by 13.4 per cent and 19.4 per cent respectively.
Scotiabank economist Derek Holt said the surge in imports, although negative for the trade deficit, suggests the retail sector had a good month in November.
“This means net trade is likely to be a drag on November gross domestic product, but it signals underlying strength in other areas of the economy that pulled in more imports such as the consumption plus investment plus government spending components,” he explained in a note to clients.
Assuming a flat December, real exports could drag down economic growth by as much as 2.1 per cent in the fourth quarter, Holt said.
Overall, seven out of 11 export sectors declined in November as shipments slipped 0.9 per cent to $37.5 billion. The retreat was led by a 14.6 per cent fall-off in the farming-fishing-food categories, a 7.6 per cent drop in metal and non-metallic mineral exports, and energy shipments slipped 1.2 per cent.
On the plus side, exports in motor vehicles and parts rose 6.6 per cent and basic and industrial chemicals increased by 7.5 per cent during the month.