Trade deficit widens to $2.8B as exports fall

A wide-ranging drop in Canadian exports in October helped widen Canada's trade deficit to $2.8 billion, Statistics Canada reported Friday.

The bad news on Canadian trade activity continued with a revisiontothe deficit figure for September to $2.3 billion, up from the $1.7 billion originally estimated.

Economists pointed to the deterioration in trade as fresh evidence of a potentially slowing Canadian economy in the final quarter.

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Total exports decreasedin volume by 1.5 per cent and the value was down 1.8 per cent to $43billion in October.

The biggest fall was in exports of farm, fishing and food products, down 7.3 per centor $2.5 billionafter canola exports fell by 33 per cent.

Exports declined on the month in every sector but industrial machinery, and over the year, they are down 3.5 per cent, mainly due to the low price of oil.

Poor outlook for quarter

Imports also were down, falling 0.8 per centto $45.7billion in October, led by lower imports of consumer goods.

The Bank of Canada has been counting on a low dollar to boost Canadian exports, but that formula has been slow to work.

To make the outlook for the economy worse, this month's figures show a 2.8 per cent drop in exports to the U.S., Canada's largest trading partner.

"Today's report provides an early glimpse of the state of the Canadian economy in the fourth quarter," says TD economist Dina Ignjatovic.

"Following September's real GDP report, Canada'stradebalance is just one more indicator that suggests the economy is losing momentum," she said.

RBC economist Nathan Janzen said the figures raise questions about the durability of global demand growth, though there still is potential for the low dollar to boost exports in the near future.

"Deterioration in the real net trade balance in October, while still early, leaves net trade tracking a drag on GDP growth in the fourth quarter of 2015, with our forecast assuming a 1.8 percentage point drag on annualized fourth-quarter GDP growth," he said in a note to clients.