Canada's September Trade Deficit Surpasses Expectations

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Canada's September Trade Deficit Surpasses Expectations

OTTAWA - Canada's trade deficit in September amounted to CA$1.26 billion (US$908 million), exceeding analysts' expectations. This figure indicates that the country has recorded a trade deficit for the seventh consecutive month. According to Statistics Canada, the deficit was primarily driven by a decline in exports to significant trading partners outside the U.S. The United States is Canada's largest trading partner.

September's trade figures were affected by an increased reliance on estimation methods due to the digital transition of the Canada Border Services Agency Assessment and Revenue Management. Analysts had previously estimated the deficit would be approximately CA$800 million. Additionally, the trade deficit for August was revised from CA$1.1 billion to CA$1.47 billion.

Exports showed a slight decline of 0.1% in September, with metal and non-metal mineral products experiencing the most significant drop. This category saw a reduction of 5.4%, with a substantial 15.4% decrease in shipments of unwrought gold. Overall, export prices fell by 1.5%, while the volume of exports increased by 1.4%.

Imports also fell by 0.4% in September and remained nearly stable in volume. The decrease in imports was most notable in metal and non-metal mineral products, which experienced a 12.7% decline. This reflects a weak demand environment in Canada and expectations of slow growth. These economic challenges have been exacerbated by the high interest rates that the Bank of Canada has been lowering since June. The Bank has reduced the key policy rate to 3.75% over four consecutive meetings.

As markets prepare for the Bank of Canada's next monetary policy decision on December 11, there is a 47% probability of a 50 basis point cut being indicated. Meanwhile, the Canadian dollar appreciated slightly against the U.S. dollar, rising to 1.3876, equivalent to 72.07 U.S. cents. The yield on two-year government bonds increased by 2.89 basis points to 3.134%.

Canada's total exports stood at CA$63.88 billion while imports totaled CA$65.14 billion. Despite the overall trade deficit, Canada's trade surplus with the United States rose in September from CA$7.82 billion the previous month to CA$8.29 billion. Imports from the U.S., which account for 60% of all Canadian imports, increased by 0.8% compared to the previous month.