* Imports rise 2.7 percent, exports fall 0.9 percent
* Data confirms problems facing export sector
* Trade deficit is fourth highest on record
* Analysts say U.S. demand should increase
By David Ljunggren
OTTAWA, Jan 11 Canada's trade deficit jumped
unexpectedly in November as imports rose and exports fell, a
sign that challenging market conditions are likely to have cut
into fourth-quarter economic growth.
Statistics Canada said on Friday that November's deficit was
C$1.96 billion ($2.00 billion), up from C$552 million in
The deficit, the fourth-largest on record, was much greater
than the C$600 million shortfall markets had expected and
reflects the continuing problems that exporters face in weak
foreign markets and a strong Canadian dollar.
"The trade data was definitely disappointing although this
does reiterate a well-known theme that net exports will drag on
Canada's economy. We do expect that the picture should brighten
somewhat in 2013," said David Tulk, chief Canada macro
strategist at TD Securities.
"For the time being this is ... still describing a world of
elevated uncertainty and slowing growth momentum," he told
Imports rose 2.7 percent on higher shipments of electronic
and electrical equipment, in particular cellular phones, as well
as motor vehicles and parts. Volumes grew 2.2 percent from
Exports dropped 0.9 percent on lower demand for farm,
fishing and food products and metal and non-metallic mineral
products. Volumes rose 0.4 percent from the previous month.
Benjamin Reitzes of BMO Capital Markets noted that exports
were 6.3 percent below year-before levels, the worst performance
in three years, while imports were flat.
"It looks as though trade might be a net drag on growth
again, putting some downside risk on our call for 1.2 percent
growth in the fourth quarter," he said in a note to clients.
The Bank of Canada's most recent forecast calls for 2.5
percent growth, annualized, in the fourth quarter.
Canada's currency slipped to C$0.9835 versus the
greenback, or $1.0168, after the data was released from around
C$0.9830, or $1.0173, immediately before. A simultaneous release
showed the United States also had a larger than expected trade
deficit in November.
Peter Hall, chief economist at Export Development Canada,
noted that the United States - Canada's main trading partner -
was recovering from Hurricane Sandy in November. At the same
time, market uncertainty over the so-called U.S. "fiscal cliff"
was starting to mount.
"The global business cycle is still on the up and up. These
numbers were interrupted by the temporary factors that got in
the way of the production process," he told Reuters.
But he added: "This is clearly not an upbeat report, and
adds further uncertainty because we're still saying 'The most
likely outcome is for this to pick up'. We're still in the
business at the moment of justifying why the numbers are weak
based on temporary factors, and I think the world's getting a
little weary of being perpetually in that state."
Exports to the United States, which took 75.5 percent of all
Canadian exports in November, rose 3.9 percent, while were up by
1.7 percent. As a result, Canada's trade surplus with the United
States increased to C$3.34 billion from C$2.69 billion in
Exports to countries other than the United States fell by
13.4 percent to C$9.21 billion, the lowest level since September
2010. Imports rose 4.6 percent to C$14.51 billion, resulting in
a record deficit of C$5.30 billion in non-U.S. trade.