* Canada exports flat, imports up 0.4 pct to new record
* Trade surplus with United States drops to 9-month low
* European crisis having an effect, say analysts
By David Ljunggren
OTTAWA, July 11 Canada's trade deficit
unexpectedly rose in May, pushed up by record imports while
exporters struggled to make any progress in the face of the
European economic crisis.
The May deficit edged up to C$793 million ($777 million)
from C$623 million in April, Statistics Canada said on
Wednesday. Market analysts surveyed by Reuters had expected a
deficit of C$380 million.
Exports are vital for the Canadian economy and accounted for
around 31 percent of gross domestic product in 2011. Exporters
have for years faced challenges from the strong Canadian dollar,
weak markets and increased foreign competition.
"It's not inspiring. It looks like the rest of the world is
clearly having an impact on the numbers," said Peter Hall, chief
economist for the Export Development Corporation.
"There really isn't a way of putting a good spin on it ...
on balance this is a pause month," he told Reuters, noting that
oil prices had fallen during May as markets fretted about
Europe. Canada is a major energy exporter.
Exports were virtually unchanged at C$38.88 billion with an
increase in volumes offsetting a fall in prices.
Imports grew by 0.4 percent to a record C$39.67 billion on a
3.7 percent rise in the value of energy products. Even though
Canada is a net energy exporter, many eastern Canadian
refineries buy oil from abroad.
The previous high for imports was the C$39.51 billion seen
in April 2012.
"With weaker energy prices weighing on the trade balance,
today's report continues to highlight the risks to trade from
weaker resource prices given the current slowing global
economy," said Emanuella Enenajor and Andrew Grantham of CIBC
The data did little to move the Canadian dollar
which at 10:10 a.m. (1410 GMT) was at C$1.0184 to the U.S.
dollar, or 98.19 U.S cents, compared to C$1.0189, or 98.15 U.S.
cents, shortly before the figures were released.
Exports to the United States, which took 72.6 percent of all
Canadian exports in May, edged up by 0.2 percent after four
consecutive month-on-month falls.
Imports though jumped by 1.8 percent, pushing Canada's trade
surplus with the United States down to a nine-month low of
C$3.23 billion from C$3.61 billion in April. The surplus was the
smallest since the C$2.70 billion recorded in August 2011.
Analysts warned the data suggest trade is likely to be a
drag on second-quarter growth, increasing the likelihood that
the Bank of Canada will not raise interest rates this year.
"The external sector is likely to struggle further with
renewed European headwinds and softer foreign demand," said TD
Securities strategist Mazen Issa.
"For Canadian growth to transition towards net exports, it
will have to ultimately rely on the U.S. ... Canada's trade
surplus with the U.S. has been deteriorating and will limit the
extent that Canada's external sector can grow this year."