Record Drop in Agriculture Exports Widens Canada Trade Deficit

(Bloomberg) -- Canada's merchandise trade deficit widened more than expected in February as railway delays led to a record drop in food exports.

The merchandise trade deficit of C$2.69 billion ($2.11 billion) followed a C$1.94 billion January shortfall, Statistics Canada said Thursday in Ottawa. Economists predicted the February figure would come in at C$2.10 billion.

While two-way global trade rebounded in February after unexpected auto factory shutdowns, the grain backlog limited the rise in exports to 0.4 percent while imports grew 1.9 percent.

Highlights

• Declines of 42 percent in wheat exports and 40 percent for canola led to a record 17 percent drop in the larger farm, fishing and intermediate food category. Those drops “coincided with rail transportation issues in Western Canada in February,” Statistics Canada said
• Exports of automobiles and parts rose 5 percent and imports in the category increased 1.7 percent
• Canada's merchandise trade balance with the U.S., a contentious subject as the nations renegotiate the North American Free Trade Agreement, narrowed to a C$2.58 billion surplus, from C$2.93 billion
• Canada's imports were also boosted by a 15 percent rise in energy products, to the highest since November 2014

Big Picture

Canada has reported trade deficits since January of last year, amplifying concerns about a decline in competitiveness. Finance Minister Bill Morneau said last month he wants to focus on smaller policies that boost competitiveness and signaled he won't match major U.S. tax cuts because rates in his country are already good enough to draw new business.

Other Details

• The volume of exports, which strip out price changes and can be a better indicator of economic growth, fared a little better with a 0.6 percent increase on the month. Import volumes rose 1.9 percent
• From the same month a year earlier, imports climbed 3.5 percent in February and exports by 1.5 percent
• In dollar terms, the decline in wheat exports was the largest on record. For canola it was the second largest after a decline set in 2014

To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net.

To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Stephen Wicary

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