Canada posts surprise trade deficit on cars, trucks and crude exports

Canada posted a surprise trade deficit of $312 million in December, as exports were dragged lower by cars, trucks and crude oil, while imports edged up due to a record rise consumer goods, Statistics Canada data show on Wednesday.

Analysts in a Reuters poll had forecast a $1.1 billion surplus. November’s surplus was downwardly revised to $1.06 billion from $1.57 billion reported initially.

Total exports fell 1.9 per cent in December, the second consecutive decline, while imports were up 0.2 per cent.

Canada’s gross domestic product likely grew in December and the economy likely ended the year on a positive note, according to Statscan’s advance estimate released last week.

The Bank of Canada has projected zero growth in the quarter ended in December after a 1.1 per cent contraction in the third quarter. Final GDP data will be released later this month.

The central bank has kept its policy rate on hold at a 22-year high since July, and said monetary policy had cooled demand. Now the bank is looking for signs that inflation is slowing sufficiently to consider rate cuts.

The fall in total exports was led by an 8.2 per cent drop in exports of motor vehicles and parts — mainly passenger cars and light trucks — and energy products. Softer crude oil prices weighed on exports for the second straight month.

By volume, exports were down 0.4 per cent.

The rise in total imports was due to a the strongest monthly increase in consumer goods. Pharmaceutical products was the biggest contributor to consumer goods, though clothing, footwear and accessories also increased.

By volume, total imports rose 1.3 per cent. 

The trade figures were impacted by the appreciation of the Canadian dollar in December when the average value of the Loonie, compared with U.S. greenback, recorded the largest monthly gain since May 2021.

A large share of Canada’s trade is done in U.S. dollars, which means converted values are lower when the Canadian dollar appreciates against the U.S. dollar.