With effective trading platforms, new traders can build experience and glean the available resources to become successful investors who are in step with the changes in the economy – changes such as the negative trends Canada is now experiencing.
Trade Deficit More Than Expected
Canada is continuing to face increasing trade deficit on account of exports plunging significantly lower than imports. This deficit touched a record figure of $3.4 billion in March 2016, according to Statistics Canada. This is a further plunge from the $2.5 billion deficit of February and much higher than the expected deficit of $1.4 billion. Exports sank to $41 billion, a fall of 4.8%, in March.
Imports also sunk, but by a lesser percentage of 2.4%, to $44.4 billion. The fall was experienced in 8 of the 11 sectors, particularly in the realm of aircraft, transportation equipment, and consumer goods. However, this reduction in imports was kind of offset by the increased importing of energy products.
Trade Imbalance with the United States
Canada’s trade imbalance with the United States was the cause for much of the deficit. While Canada usually exports to the US significantly more than it imports, March 2016 actually witnessed a narrowing of its trade surplus with the US to $1.5 billion which is the lowest surplus to be witnessed since December 1993. Canada’s exports to the US experienced a 6.3% decline to $30.4 billion as imports also slipped to $28.9 billion, a decline of 4.8%. The country’s trade deficit with other countries rose to $4.9 billion from the $4.6 billion in February 2016.
Stronger Loonie Adding to the Gloom
A stronger loonie (Canadian dollar) is part of the reason for this gloom, experts believe. While on Tuesday, May 3, 2016, it did lose over a cent US, it is still trading at around 79 cents US which is 10 cents US higher than what it traded at in January. This does pose a risk to export gains that were newly won, before the decline.
Contributing to the recent export decline is the slowdown in importing by US. This contributed to the 4.8% decline in Canadian exports, with the US being Canada’s primary trading partner. But right from the start of the year Canada’s export position has been deteriorating, which coincides with the new strengthening of the Canadian dollar. With the reduction in exports, trade cannot be thought of as contributing to the country’s economic growth.
While experts believe that the growth of the Canadian economy in the second quarter would be slower than that of the first quarter, the loonie is expected to remain below 80 cents US. So thinking in the medium term, Canadian exports should contribute to the economy.
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