Canada's Trade Deficit Narrows to Six-Month Low as Imports Fall

(Bloomberg) -- Canada’s trade deficit in April narrowed to the lowest in six months as imports slumped and exporters continued to show signs of strength.

The merchandise trade gap narrowed to C$1.90 billion ($1.5 billion), half the C$3.93 billion gap recorded a month earlier, Statistics Canada reported Wednesday in Ottawa. Imports fell 2.5 percent, paring back strong gains in March. Exports advanced 1.6 percent, the sixth gain in the past seven months.

After struggling through the middle part of last year, Canada’s exports have seen a revival in recent months due to a run-up in oil prices and stronger demand for non-energy exports.

That’s a good sign for an economy that will need the export sector to make a bigger contribution to growth as consumers scale back. The biggest gains were recorded in energy, metal products, forestry and consumer goods.

The narrowing in the deficit was much larger than anticipated by economists, who had forecast a trade gap of C$3.4 billion during the month according to a Bloomberg survey.
In volume terms, exports rose 1.2 percent, adding to a strong 3.5 percent gain a month earlier. Real non-energy exports were up 1.5 percent during the month.

The decline in imports, which helped reduce the trade balance in April, isn’t all good news. Economists see rising imports as a gauge of domestic demand and business investment, and the figures in April signal Canada’s economy scaled back purchases during the month.

In volume terms, imports were down 2.4 percent. That includes a 0.2 percent decline in machinery and equipment and a 2 percent drop in electronic and electrical equipment -- two types of imports seen as indicators for business investment.

Other Highlights

• Canadians’ car buying binge seems to be waning, with imports of motor vehicles down 5.8 percent in April. Imports of consumer goods were down 4.9 percent during the month.
• The trade surplus with the U.S. widened to C$3.6 billion in April, after falling to C$2 billion in March.

--With assistance from Erik Hertzberg.

To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net

To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Greg Quinn

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