According to National Bank of Canada analyst Jocelyn Paquet, the increase in the trade deficit in Canada in october was due to a decline in energy prices.
Key Quotes:
“While Canada’s trade deficit was larger than expected in October, the deterioration was mostly due to a steep decline in energy exports, the latter hampered by a 10.2% drop in prices. Energy prices also fell on the imports side, but to a lesser extent (-4.4%). This discrepancy highlights the specific problems faced by the Canadian energy sector.”
“Although oil prices are falling globally, producers in Canada must also face a shortage of pipeline capacity and mounting inventories. These issues pushed the WTI-WCS spread to an all-time high of 50$ in early October, a development which put downward pressure on nominal exports and led to a worsening of trade terms. The situation is unlikely to have improved in November as the benchmark price for Canadian oil continued to slump.”
“Not everything was bad in October’s trade report. Excluding energy, the trade balance actually improved markedly with gains in 7 out of 10 exports categories.”
“A look at the real term data suggests that trade might contribute to growth in Q4, as real exports rose and real imports stayed roughly unchanged in the month.”
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