Canada’s trade deficit narrowed more than expected in January as imports pulled back from a record high, but exports tumbled by the most in six months as the country shipped fewer cars and forestry products, according to the latest Statistics Canada numbers.
The $1.91 billion gap was smaller than the $2.50 billion shortfall forecast by economists.
Exports in January fell 2.1 per cent — the largest drop since July 2017 — from December’s record high.
“There’s reason to expect an even more cautious tone from the Bank of Canada,” Andrew Grantham of CIBC Economics told Reuters, adding in a note to clients that the weakness in exports was a bad indicator for monthly GDP.
The drop in exports came as prices for goods climbed 1.5 per cent, in part due to the Canadian dollar rising against its U.S. counterpart in January.
Statscan said exports of passenger cars and light trucks fell due to unusual plant closures. Shipments of forestry products and building materials fell 6.6 per cent as the United States resumed collecting import duties on Canadian lumber at the end of 2017.
Ross Prusakowski, a senior economist at Export Development Canada, noted the Canadian currency had weakened against the greenback in recent weeks.
“As Statscan has highlighted, there were a couple of transitory factors that affected a few key industries and that should in the near term kind of wash out of the data as well,” he told Reuters in a phone interview.
Imports fell 4.3 per cent as declines were broad based, including an 11.3 per cent drop in industrial machinery and equipment. Canada’s trade surplus with the United States narrowed to $3.13 billion.
Separately, Statscan said the labour productivity of Canadian businesses rose 0.2 per cent in the fourth quarter as an increase in business output outpaced a slowdown in hours worked.