Canadian trade deficit narrows considerably in October

Canadian trade deficit narrowed in the month of October to CAD 1.5 billion from September’s CAD 3.4 billion. Exports were up 2.7 percent, whereas imports dropped 1.6 percent. Exports in real terms rose 1.2 percent, while imports dropped 3.9 percent. The strength in exports was broad based, with all except two industries recording gains. Chemical, plastic and rubber products lead the way, followed by farm, fishing and intermediate food products.

The fall in imports was also widespread, with metal ores and non-metallic minerals and motor vehicles and parts registering the largest declines. The latter was driven by lowered parts imports in light of the strike at an auto assembly plant. Aircraft and other transportation equipment provided some offset.

Canada’s trade surplus with the U.S. broadened to CAD 3.5 billion in the month as exports were up 4 percent but imports dropped 0.6 percent. Trade deficit of Canada with the rest of the world narrowed to CAD 5 billion in October, as the decline in imports surpassed the decline in exports.

After four straight months of declines, volumes of export bounced, fully erasing the drop seen in August and September. This gives a stronger handoff for the December quarter that should see a marked step up in the fourth quarter relative to the third quarter’s 1.7 percent growth, stated TD Economics in a research report.

Exports are expected to gain some momentum, underpinned by a sound U.S. economy and a Canadian dollar hovering around the 80 US cent mark. The net trade report, along with last week’s employment report is expected to be looked at favorably by the Bank of Canada.

At 15:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was bullish at 89.9847, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 67.6451. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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