Canadian exports dropped 3.5% in November while imports dipped 2.7%, leading to a increase in the country’s overall merchandise trade deficit with the world, according to Statistics Canada data released January 7.
This was the second consecutive monthly decline in exports, bringing the country’s deficit to $644 million from $327 million in October.
Analysts had expected a much smaller deficit for the month, closer to $100 million, according to CIBC’s Nick Exarhos.
Plummeting oil prices are driving the increasing trade deficit, said Exarhos.
“The rout in oil markets is making the desired turn towards export growth and capital spending that much further away from becoming a reality, pointing to lower for longer on Canadian rates,” he said.
The biggest trade deficit was with China, which increased by $32 million to over $1.5 billion.
Despite these overall trends, Canada still maintains an overall trade surplus of $2.9 billion with the United States.
This overall deficit follows six months of surpluses in the last nine months.
Benjamin Reitzes, senior economist at BMO Capital Markets, expects the trend of falling oil prices to continue.
“Energy exports plunged 7.8% in the month and will see similar-sized declines for at least the next couple of months as prices have fallen materially further,” he said.
Reitzes said overall, this latest trade report was “bleak” and could be a sign of more negative news to come.
“While trade performed solidly in 2014 as a whole, it’s not ending the year in particularly good shape,” he said. “And the trade deficit is likely to worsen materially due to the steep drop in energy prices, suggesting it will be some time before we see another surplus.”
