Figures released Wednesday morning show that Canada’s trade deficit narrowed more than expected in September, helped by a modest pickup in exports and reinforcing economists’ views that the country pulled out of recession in the third quarter.
The trade gap declined to a deficit of $1.73 billion, data from Statistics Canada showed on Wednesday, topping analysts’ expectations for a deficit of $1.90 billion.
Exports rose 0.7% with volumes increasing by the same amount as prices were unchanged. Consumer goods led the way up, while a rebound in prices saw exports of energy products increase.
Momentum in the export sector is key to the Bank of Canada’s outlook for the economy. After cutting interest rates twice this year to offset the impact of cheaper oil prices, the bank is widely expected to hold rates at 0.5% when it next meets in December.
The drop in oil price over the past year has weighed on the economy, with growth stalling in the first half of the year. But economists and policy makers expect growth resumed in the later half, with trade set to contribute to third-quarter growth.
The report did not alter the view that the Bank of Canada is likely to be on hold for some time. It is not expected to move again on rates until 2017, when analysts foresee a hike.
The Canadian dollar was little changed against the greenback immediately following the data.
Exports to the United States, Canada’s largest trading partner, edged down 0.3% . But exports to countries other than Canada’s neighbour to the south surged 4% as more goods went to countries including Turkey and Spain.
Overall imports fell 1.3% after rising for the past four months in a row. September’s decline was driven by a decrease in imports of metal and non-metallic mineral products, as well as a decrease in energy imports.
