Canada posts slim November trade deficit on lower energy exports

A shipping container is unloaded at the Port of Montreal

By Ismail Shakil

OTTAWA (Reuters) -Canada posted a trade deficit of C$41 million ($30.20 million) in November as exports were dragged down by energy products, while pharmaceuticals and other consumer goods drove a decline in imports, Statistics Canada said on Thursday.

The deficit missed analysts' forecast of a C$610 million surplus in November. Statscan also revised October's surplus down to C$130 million from an initial C$1.21 billion.

"Some of the deterioration came from lower prices for both exports and imports - the latter will help cool domestic inflation pressures," Shelly Kaushik, an economist at BMO Capital Markets, said in a note.

Inflation hit a four-decade high last year that prompted the Bank of Canada to raised rates at a record pace to tame prices.

Exports were down 2.3% in November, led by the fifth consecutive decline in energy products shipments. Lower exports of coal to Asian countries and cheaper natural gas in November contributed to the decline, Statistics Canada said. By volume, exports were down 1.4%.

Imports fell 2.1%, largely on consumer goods. Pharmaceutical and medicinal products decreased the most, including treatment and vaccines for COVID-19, Statscan said. Imports were down 0.7% in volume terms.

Thursday's data presents "downside risks" to the preliminary GDP estimate for November, Stephen Brown, senior Canada economist at Capital Economics, said in a note.

Statscan said in a preliminary estimate last month that the Canadian economy likely grew by 0.1% in November after expanding at the same pace in October.

"As the weakness of imports coincided with the earlier COVID-19 restrictions in China, it could be that lower supply is to blame," Brown said. "But with the business and consumer surveys weakening in recent months, it seems likely that lower demand is also playing a role."

The Canadian dollar was trading 0.5% lower at 1.3540 to the U.S. dollar, or 73.86 U.S. cents, after touching its strongest intraday level since Dec. 5 at 1.3467.

($1 = 1.3574 Canadian dollars)

(Reporting by Ismail Shakil; Additional reporting by Dale Smith in Ottawa and Fergal Smith in Toronto; Editing by Nick Macfie and Barbara Lewis)