Canada’s trade deficit widens in November, economic activity likely decelerated at end of 2018

Canadian trade deficit widened in November. The deficit came in at CAD 2.1 billion, widening from an upwardly revised CAD 850 million in the prior month. The consensus expectations were for CAD 1.95 billion. The trade deficit was driven by a 2.9 percent sequential fall in exports, mainly due to crude oil exports, while imports dropped 0.5 percent.

Changes in volumes were similar. Exports volumes fell 1.8 percent, whereas prices dropped 1.1 percent. Import volumes were down 0.3 percent while prices dropped 0.1 percent. Crude oil exports fell 17.7 percent, due to a third straight monthly fall in prices. The volume of crude exports dropped 4.4 percent as Canada exported less oil to the U.S. Other export products also fell in the month, including a 7.5 percent fall in chemical, plastic, and rubber products, and a 5.7 percent fall in forestry products, including building and packaging materials. Non-energy exports fell 1.4 percent.

A 2.8 percent fall in the import of motor vehicle and parts aided in driving overall imports lower in November. Lower imports of vehicles were the main culprit, and this import category has fallen in 9 of the past 12 months, coinciding with the deceleration in auto sales.

Metals and non-metallic imports also fell considerably in November, likely because of a reversal of recent strength, noted TD Economics in a research report.

“Oil production curtailments in Alberta, the GM plant shutdown, and slower real wage growth are indications that Canadian economic activity slowed at the end of 2018. Moreover, headwinds from mandatory oil production curtailments in early 2019 and slowing growth in foreign demand are factors that are likely to continue to weigh on Canadian exports and economic growth in the months ahead”, added TD Economics.

At 17:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was neutral at 35.6558, while the FxWirePro's Hourly Strength Index of US Dollar was bearish at -81.2597. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex