The November merchandise trade deficit widened sharply to $2 billion from an upwardly revised $0.6-billion shortfall in October (initially reported as a deficit of $0.2 billion), according to figures released this morning by Statistics Canada.
This represented the first deterioration in the trade balance, and largely deficit, since July. Expectations going into the report were for a modest deterioration in the November deficit to $0.6 billion. The reported deterioration in November resulted from imports rising $1.0B (+2.7%) while exports fell by $0.4B (-0.9%).
The nation's number-crunchers report that the weakness in exports was led by declines in agricultural products (-$0.4 billion) and metal products (-$0.3 billion) with some offset by strength in motor vehicles and parts (+$0.4 billion). The increase in motor vehicle and parts exports was the first such gain since June and mainly reflected an 8.8% (+$0.3 billion) rise in exports of passenger cars and light trucks. The strength in imports was fairly broad-based and was led by increases in electronic and electrical equipment (+$0.2 billion), motor vehicles and parts (+$0.2 billion) and metal products (+$0.2 billion).
On a volumes basis (using 2007 chained dollars), imports rose 2.5% in November while exports managed to eke out a 0.1% increase in the month. This resulted in the real deficit widening to $2.1 billion from $1.2 billion in October (previously reported as -$0.5 billion).
According to experts at RBC Economics: "the deterioration in the November trade deficit on a volumes basis combined with the sizable revision in the previous month points to a weakening in net trade relative to the third quarter and provides some material downside risk to our expectation that net exports could make a sizable contribution to real GDP growth to close out 2012.
"On its own, this would suggest some downside risk to our forecast for real GDP growth to post an annualized 1.6% increase in Q4; however, the rise in imports suggests that there should be some offset from stronger domestic demand and we continue to expect that growth will improve upon the disappointing 0.6% gain recorded in Q3."
