Canada in March recorded a surprise trade deficit of $2.28-billion, the largest in nine months, as exports declined faster than imports, data showed on Thursday.
Total exports fell 5.3 per cent in March mainly due to exports of unwrought gold declining from a record high reached in February, while imports were down 1.2 per cent, led by electronics and metal ores and non-metallic minerals, Statistics Canada said.
Analysts polled by Reuters had forecast a trade surplus of $1.50-billion in the month. The statistics office also downwardly revised February’s trade surplus to $476-million from the $1.39-billion reported initially.
“Interest rates catching up with consumer demand, in the United States and Canada, in particular, (which) have the added issue of consumer indebtedness,” said Stuart Bergman, chief economist at Export Development Canada.
The soft patch in exports will continue this year, exacerbated by the fact that automakers in Canada are slowing production as they pivot towards electric vehicles, he said, adding exports will stabilize and pickup in 2025.
Data on Tuesday showed the Canadian economy likely stalled in March after expanding less than expected in February, signalling a loss in momentum that bolstered expectations that the Bank of Canada (BoC) would have more reason to lower borrowing costs in June.
The BoC has kept interest rates close to a 23-year high of 5 per cent since last July but expectations have been building that its first 25 basis point interest rate cut is approaching on the back of easing inflation.
Money markets see a more than 50 per cent chance of a rate cut in June and have fully priced in a cut by July.
The Canadian dollar was trading a tad stronger with the loonie up by 0.20 per cent to $1.3720 against the greenback, or 72.89 U.S. cents.
The decline in exports in March was at the fastest rate since February 2023, with decreases in nine of 11 export product sections.
Exports of metal and non-metallic mineral products, which includes the subcategory for gold, decreased 17.4 per cent in March. Crude oil recorded its fifth decrease in six months and contributed to the decline in exports of energy products in March.
The decrease in imports was also broad-based, with seven of the 11 product sections recording declines. Imports of electronic and electrical equipment and parts were down 8.1 per cent in March, while metal ores and non-metallic minerals were down 29.2 per cent to $1.3-billion in March, their lowest level since September 2021, Statscan said.
By volume, total exports declined 4.7 per cent in March, while total imports were down 1.2 per cent.