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Canada posts surprise trade deficit as exports fall

Traffic makes its way to Ambassador Bridge that connects Canada to the United States Windsor Ont. on Friday June 15, 2012.

Mark Spowart/THE CANADIAN PRESS

Canada posted a surprise trade deficit of $638-million in April, driving home the central bank's concerns over exports.

Canadian exports tumbled by 1.8 per cent, Statistics Canada said Wednesday, while imports rose 1.4 per cent, leading to the shortfall that compared to a March surprlus of $766-million.

Economists had expected to see a small April surplus, rather than the hefty deficit reported by the federal agency.

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The trade reading came just before the Bank of Canada was expected to again highlight the importance of exports to the country's recovery, one of the reasons it's comfortable with a weaker currency. Wednesday's measure will do nothing, however, to raise the comfort level of the central bank where an export-led rebound is concerned.

Export volumes declined by 0.8 per cent, while prices slipped 1 per cent, for a level of $42.8-billion. The drop was led by energy and metal exports, while gains were led by forestry products after the end of a Vancouver port strike.

Imports, in turn, now stand at a record high of $43.5-billion, with volumes climbing 1.9 per cent in April and prices actually slipping by 0.4 per cent.

Consumer goods led the import drive.

Economists noted that the trade picture isn't as bad as it might otherwise appear, given the impact of energy exports.

"The deterioration in the April trade balance is disappointing, particularly given the decline in exports that occurred despite expectations for an improvement as weather-related transportation disruptions related to the colder-than-normal winter were expected to ease," said Nathan Janzen of Royal Bank of Canada.

"With that said, much of the export weakness was concentrated in lower energy, and particular natural gas, exports as an easing in the cold weather may have also contributed to lower demand for home heating. Excluding the energy sector, exports increased for a third consecutive month, climbing 1.5 per cent in April to build on 1.2-per-cent and 3.3-per-cent increases in March and February, respectively."

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Canada's trade surplus with the United States, its biggest trading partner, inched down to $4.3-billion April, from $4.4-billion, as exports to the U.S. slipped 0.2 per cent and American imports rose 0.3 per cent.

Exports to other countries, however, took a big hit, falling 7 per cent. Canadian goods headed to the European Union, in particular, took it on the chin, tumbling 22.8 per cent.

Imports from countries other than the United States rose 3.5 per cent.

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More

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