Canadian December Trade Surplus Widens Unexpectedly
Canada’s trade surplus widened unexpectedly in December to the largest since February, as exports of cars and energy products gained.The surplus widened for a second-straight month to C$4.98 billion ($4.24 billion), from a revised C$4.72 billion in November, Statistics Canada said today in Ottawa. Exports rose 3.8 percent to C$40.4 billion, and imports gained 3.6 percent to C$35.4 billion.
The wider trade surplus, combined with January employment data that showed almost seven times more new jobs than forecast, suggests Canada’s economy rebounded after slowing in the second and third quarters. The country’s currency has fallen since touching a 28-year high in May, helping factory exports abroad and reducing the need for the Bank of Canada to lower interest rates.
The trade sector “had its best performance in over two years” between October and December, Stefane Marion, an economist with National Bank Financial in Montreal, said in an interview. The December data means trade contributed two percentage points to growth during the quarter, Marion said.
Economists had forecast the December trade surplus to come in at C$4.7 billion, according to the median of 23 estimates in a Bloomberg News survey.
The Canadian dollar rose to 85.73 U.S. cents at 4:11 p.m. in Toronto. The currency gained the most in seven months on Feb. 9 after the employment report, reaching 85.30 U.S. cents.
The yield on the banker’s acceptance contract due in December rose 3 basis points to 4.32 percent on the Montreal Exchange, indicating more investors are betting the central bank won’t cut interest rates before then.
`Widespread Strength’
“The widespread strength in both exports and imports in December suggests that overall gross domestic product also ended the year on a strong note,” Doug Porter, an economist with BMO Capital Markets in Toronto, said in a note to clients. It’s the second time in two-and-a-half years that a widening trade surplus has contributed to quarterly growth, he wrote.
Statistics Canada reports economic growth figures for December and the fourth quarter on March 2.
The Bank of Canada predicted last month the economy would expand 2.4 percent in the first quarter and 2.6 percent in the second quarter, after slowing to a 1.5 percent annualized rate in the fourth quarter. Should that scenario bear out, the central bank won’t need to cut interest rates to boost demand, Bank of Canada Deputy Governor David Longworth said Feb. 6.
Canadian employers added 88,900 jobs in January, Statistics Canada said Feb. 9. Still, a majority of 12 economists surveyed by Bloomberg News between Jan. 31 and Feb. 8 see the bank’s forecast as too optimistic and predict a fourth-quarter rate cut.
2006 Surplus
For all of 2006, the size of the trade surplus shrank C$11.2 billion to C$53.6 billion, the smallest annual surplus since 1999, the statistics agency said.
The trade surplus with the U.S., which buys about 75 percent of Canada’s exports, widened to C$7.92 billion, from November’s C$7.48 billion, the statistics agency said today.
Carmakers’ sales abroad rose 8.4 percent to C$7.54 billion, the third-straight gain, the statistics agency said.
Canadian energy exports increased 5.8 percent to C$7.28 billion during the month, led by natural gas. Canada sits on the largest oil reserves outside the Middle East and is the world’s No. 2 exporter of natural gas.
Exports of machinery and equipment rose 2 percent to C$8.75 billion and those of consumer goods other than cars surged 9.2 percent to C$1.79 billion.
Cars, Energy
Factory exports have benefited as the Canadian dollar fell almost 7 percent since touching 91.44 U.S. cents on May 31. Overall though, exports will probably drop in the first quarter of this year, as carmakers shut down plants and commodity prices fall, National Bank’s Marion said.
Cars and energy products such as crude oil and heating and diesel fuel led the imports’ gain. Energy imports advanced 7.9 percent increase to C$2.95 billion and cars imports rose 6.5 percent to C$7.13 billion.
Excluding the effects of price changes, exports rose 2.5 percent during the month, and imports gained 2.1 percent, the statistics agency said.
The U.S. trade deficit widened more than expected in December, rising 5.3 percent to $61.2 billion on higher prices for crude oil imports, the Commerce Department said today in Washington.