* Q4 deficit dips to C$17.3 bln on export strength
* Energy, food exports help shrink deficit on trade in goods
* Industrial product prices flat for second straight month
* Raw materials prices rebound 3.8 percent
* Analysts continue to expect mediocre growth
By Louise Egan
OTTAWA, Feb 28 Canada's current account deficit
narrowed in the fourth quarter of 2012 as the country exported
more goods to the United States, but the gap remained near
record levels and analysts maintained their glum outlook for
Canadian economic growth and trade.
The current account deficit for the quarter totaled C$17.3
billion ($16.9 billion), Statistics Canada said on Thursday.
That was slightly bigger than the C$17 billion forecast by
analysts in a Reuters poll, and smaller than the revised C$18.04
billion gap in the third quarter.
But the shortfall remained well above year-earlier levels
and uncomfortably close to the record current account deficit of
C$19.4 billion posted in the third quarter of 2010.
"Today's report reaffirms our expectation that net
exports will provide a modest positive contribution to what is
expected to be a mediocre GDP (gross domestic product for the
fourth quarter)," Mazen Issa, economist at TD Securities, wrote
in a note to clients.
"This does not reflect an improving external sector however,
as the slight boost from net exports is expected to stem from a
greater decline in real imports compared to the decline in real
Statscan will report fourth-quarter GDP on Friday, and the
consensus forecast is for 0.6 percent annualized growth.
Canada's GDP and employment have long recovered the losses
of the 2008-09 recession but exports have yet to return to
pre-crisis levels, battered by weak U.S. demand and the strong
Uncertainty in Canada's top trade partner and a currency
seen by many as overvalued suggest the current account deficit,
which now stands at nearly 4 percent of GDP, is unlikely to
shrink dramatically any time soon, economists argue.
"With the U.S. economy only slowly picking up steam, as
fiscal uncertainty muddies the outlook, and commodity prices
down, Canada's current account gap is expected to remain
sizeable through 2013," said Benjamin Reitzes, senior economist
at BMO Capital Markets.
Statscan said a 1.5 percent rise in the export of goods, led
by stronger energy and food shipments, was largely behind the
smaller deficit. The country's surplus on trade in goods with
the United States grew by C$2 billion in the quarter, even
though it shrank in the year as a whole.
PRODUCER PRICES UNCHANGED
The deficit on trade in services narrowed to C$6.1 billion
from a high of C$6.2 billion previously, helped by greater
spending by overseas travelers coming to Canada.
However, the investment income deficit swelled to C$6.9
billion in the fourth quarter from C$5.1 billion in the third on
increased earnings by foreigners on their direct investment in
In an indication that inflation is likely to remain tame,
Statscan reported separately that industrial product prices were
unchanged for the second straight month in January.
Raw materials prices jumped 3.8 percent in the month, the
largest gain since November 2011, making up for a 2 percent drop
Compared with a year earlier, producer prices were down 0.2
percent, while raw materials were down 4.7 percent.
In an upbeat contrast to the otherwise mediocre data on the
fourth quarter, commercial borrowing by small and medium-sized
businesses in Canada hit its highest level since 2008 in the
last three months of 2012, according to a PayNet survey released
PayNet, which tracks commercial financing for millions of
North American small and medium-sized businesses, said its
Canadian Business Lending Index was up 6 percent in the fourth
quarter from the third quarter and up 23 percent year-over-year.
A much smaller percentage of the businesses were behind on
their payments, it said.