Canada Current Account Gap Narrows in Q2

Canada's current account deficit decreased by CAD 1.6 billion in the second quarter to CAD 15.9 billion from a downwardly revised CAD 17.5 billion in the previous period and compared with market consensus of a CAD 15.2 billion shortfall. A lower deficit on trade in goods more than offset higher deficits on trade in services and investment income in the quarter.

The goods deficit fell by CAD 3.3 billion to CAD 5.3 billion in the second quarter, as the surplus with the United States rose by CAD 3.4 billion, mostly on stronger exports. Meanwhile, the deficit with non-US countries widened by CAD 0.1 billion to CAD 16.3 billion. On a country basis, the largest improvements to trade balances were with China, Hong Kong and Switzerland, while the most important declines were with United Kingdom and South Korea.

Total exports of goods rose by CAD 8.1 billion to CAD 148.0 billion in the second quarter. Exports of energy products were up by CAD 1.6 billion on higher crude petroleum volumes. Forestry products (+CAD 1.4 billion), metal and non-metallic minerals (+CAD 1.3 billion) and consumer goods (+CAD 1.3 billion) also contributed to the increase in exports in the quarter. The second quarter of 2018 was the first quarter that Canadian exports of steel and aluminum products to the United States were subject to tariffs, as they took effect on June 1. At the same time, total imports of goods were up CAD 4.8 billion to CAD 153.3 billion with basic and industrial chemical, plastic and rubber products being the main contributors, increasing by CAD 1.1 billion on higher volumes.

Meanwhile, the deficit on trade in services expanded by CAD 1.1 billion to CAD 7.0 billion in the second quarter. The surplus on commercial services decreased by CAD 0.7 billion, mostly on higher imports of financial services. This was in line with a higher volume of cross-border trading in foreign securities as well as increased new issue activity abroad by Canadian corporations in the quarter. The travel deficit expanded by CAD 0.2 billion to CAD 3.9 billion as Canadians spent more abroad in the quarter. The transport deficit also went up by CAD 0.2 billion due to higher imports of marine transport.

The deficit on primary income, which covers investment income on international assets and liabilities and compensation of employees, widened by CAD 0.3 billion to CAD 2.8 billion in the second quarter.

Investment income payments on Canada's international liabilities increased by CAD 2.2 billion to CAD 34.9 billion in the quarter. Larger profits earned by foreign direct investors in Canada, combined with higher interest paid on Canadian private corporate bonds and from banking activities, were the main contributors to the increase. Investment income receipts on Canada's international assets rose CAD 1.9 billion to CAD 32.6 billion. Receipts on holdings of portfolio and direct investment assets were both up while interest receipts from banking activities also increased.

Canada Current Account Gap Narrows in Q2

Statistics Canada | Luisa Carvalho |
8/29/2018 1:05:24 PM