Fundamental Analysis: Canada’s trade deficit unexpectedly triples in February

“This is pretty disappointing, and it’s a rude awakening for the Canadian economy”
–  Desjardins Group

Canada’s trade deficit swelled in February more than expected amid the sharpest decline in exports in almost seven years. Canada’s trade deficit grew to $1.9 billion in February, more than triple the shortfall of $628 million the month before, Statistics Canada reported. Exports plunged 5.4%, the biggest month-on-month decrease since May 2009, on a combination of lower prices and a 2.2% decline in volumes. Imports also dropped 2.6%, due to lower prices as well as a volume fall of 1.2%, reflecting that demand at home was weak in the reported month.The disappointing February trade report comes on heels of recent positive economic data. Statistics Canada reported last week gross domestic product increased 0.6% in January, the fastest pace of monthly growth since mid-2013. Before trade data, Canadian market watchers had expected first-quarter annualized growth to approach the 3% level. However, economists warn that a robust first quarter does not necessarily guarantee a positive year, as Canada continues to struggle with a sluggish growth environment. Moreover, Canada’s recovery from the precipitous plunge in the price of crude oil is likely to take more than two years as the economy moves toward non-resource exports, Bank of Canada’s official said.

© Dukascopy Bank SA

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