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It was the persistently low price of oil, combined with a rise in imports, that pushed Canada’s trade deficit to a record high in March.
The shortfall rose to C$3 billion in March – US$2.5 billion – easily surpassing the previous record of C$2.87 set in July 2012, according to figures issued May 5 by Statistics Canada (Statscan) in Ottawa. The March figure was much higher than the C$800 million deficit forecast by economists at the Bank of Canada, the country's central bank.
Adding to the bad energy news, the government also revised February’s deficit from C$984 million to C$2.22 billion, based on new data on energy prices. In fact, Statscan said that in the aggregate during the past four months, the deficit was C$2 billion higher than it had previously reported.
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Overall, the agency said, Canada’s imports rose by 2.2 percent in March, while exports actually rose by 0.4 percent to C$42.5 billion. In fact, energy aside, the country’s exports climbed by 2.4 percent during the month, which included a rise of 11.7 percent in automobiles and auto parts to C$6.6 billion. But such good news was for the most part erased by lower prices, mostly for energy.
Exports of energy products declined in March by 8.9 percent to C$6.89 billion. The government statistics agency said that included a plunge of 29.7 percent in refined oil products to C$855 billion. The price of oil and gas, meanwhile, dropped by 7 percent and export volumes of these commodities fell by 2.1 percent. Compared with March 2014, Canada’s energy exports plummeted by 43.7 percent.
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Overall, the price of oil is now nearly 50 percent lower than it was nine months ago because of an oil glut caused in part by increased production in both the United States and Canada. Prices fell even further when OPEC, at its November meeting, decided not to cut production in an effort to shore up prices.
As a result, for example, Canada’s Imperial Oil Ltd., a company owned by Exxon Mobil Corp. that specializes in oil sands, reported April 30 that its profit during the first quarter of 2015 had fallen by more than half. And the Canadian Association of Petroleum Producers has forecast that the energy industry in Western Canada will plunge by 33 percent to C$46 billion this year.
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Yet it’s not all bad news for Canada’s trade future, according to some economists. Even though the country’s trade deficit grew in March, so did overall trade itself, evidently because of the break that month in the extremely bitter cold of the past winter, which was seen to have curbed consumer demand.
As Nick Exarhos, an economist with CIBC World Markets of Toronto, said in a message to the investment bank’s clients, “March’s thaw saw two-way trade perk back up.”
Benjamin Reitzes, an economist with the investment bank BMO Capital Markets, also based in Toronto, agreed. “With our neighbor to the south expected to bounce back in the second quarter, the loonie [Canadian dollar] staying relatively weak … and oil prices staging a modest comeback, Canada’s trade profile is expected to improve in the months ahead,” he said.
By Andy Tully of Oilprice.com
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Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com