* Canada exports up by 1.0 pct, imports down by 1.2 pct
* Imports drop to 15-month low, volumes also down
* Figures suggest growth will stay sluggish: economists
By David Ljunggren
OTTAWA, Dec 11 Canada's trade deficit came in
much smaller than forecast in October as imports fell to a
15-month low, a sign the economy is still struggling to cope
with weak foreign markets and other challenges.
Statistics Canada said on Tuesday that the deficit fell to
C$169 million ($171 million) from a revised C$1.01 billion in
September. Market operators had expected a C$1.20 billion
Imports dropped by 1.2 percent to C$38.28 billion, the
lowest level since the C$37.58 billion recorded in July 2011 and
5.7 percent under the record high of C$40.60 billion in June
2012. Most sectors posted declines and volumes decreased by 1.8
"The key in this report is what it says about broadly based
import weakness as a reflection of the very soft Canadian
economy over the second half of 2012," Toronto-Dominion Bank
economist Derek Burleton said in a note to clients.
Canada's economy grew at a tepid 0.6 percent pace,
annualized, in the third quarter, in large part because of
weaker exports. Canadian exporters are struggling to cope with
the European crisis, uncertainty over the U.S. "fiscal cliff"
and a strong Canadian dollar.
Exports grew by 1.0 percent on higher shipments of farm,
fishing and intermediate food products as well as crop products
such as soybeans. Volumes were up by 0.3 percent.
"While trade looks as though it could add to Canadian GDP
growth in the fourth quarter, the underlying story is less
positive," said Benjamin Reitzes, senior economist at BMO
"Export growth remains weak, with the drop in imports
providing all the boost. With the U.S. facing uncertainty driven
by the fiscal cliff, Canadian exports will likely remain
challenged into next year," he said in a note to clients.
Exports to the United States, which took 71.8 percent of all
Canadian exports in October, dropped by 0.2 percent while
imports grew by 1.6 percent. As a result, Canada's surplus with
the United States dropped to C$2.77 billion from C$3.21 billion
Peter Hall, chief economist at Export Development Canada,
noted exports to the United States might have been higher had it
not been for Hurricane Sandy, which hit the eastern U.S.
seaboard in late October.
Year-on-year, he noted, exports in the crucial auto sector
were up by 8.0 percent.
"I don't want to make it look brighter than it actually is
... (but) in light of the U.S. weakness I think these numbers
are good," he told Reuters.
Markets focused on the smaller deficit -- the best
performance since the C$378 million surplus in March -- and the
Canadian dollar touched a more than 7-week high against its U.S.
The currency hit C$0.9858 against the greenback, or
$1.0144, after trading around C$0.9863, or $1.0139, heading into
the report. It was the Canadian dollar's strongest level since