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 totalled 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 exports." Statscan will report fourth-quarter GDP on Friday, and the consensus forecast is for 0.6 percent annualised 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 US demand and the strong Canadian dollar. 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. 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.
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 travellers 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 Canada. Raw materials prices jumped 3.8 percent in the month, the largest gain since November 2011, making up for a 2 percent drop in December. Compared with a year earlier, producer prices were down 0.2 percent, while raw materials were down 4.7 percent.
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