By Paul Vieira
OTTAWA -- Canadian exports and imports fell steeply in November, reflecting the ramifications of a strike at Canada's largest railroad.
The declines in exports and imports from October were broad based, and offer further evidence the economy stumbled in the final three months of 2019.
On a seasonally adjusted basis, Canada posted a merchandise trade deficit of 1.09 billion Canadian dollars ($839.6 million) for November, Statistics Canada said Tuesday. Market expectations were for a C$900 million deficit, according to economists at BMO Capital Markets.
Exports fell 1.4% to C$48.70 billion and imports dropped 2.4% to C$49.78 billion from October. On a volume, or price-adjusted, basis, exports plunged 2.7% while imports decreased 1.3%.
October's trade data were revised and now indicate that the country recorded a wider goods-trade deficit in the month than previously thought. The deficit in October was C$1.61 billion, versus an earlier estimate of a $1.08 billion shortfall. The revisions also indicate exports fell 0.4% versus the previous estimate of a 0.8% increase, while imports were relatively unchanged.
Incorporating separate data tracking trade in services, Canada's total trade deficit with the rest of the world in November narrowed to C$2.59 billion from C$3.00 billion the previous month. Canada's main trade report captures merchandise goods but excludes services.
Canada's economy contracted in October. The result prompted market watchers to revise their forecasts for growth in the final quarter of 2019 and predict a shift in tone from the Bank of Canada. Last month, the Bank of Canada kept its main interest rate unchanged at 1.75%, although it surprised markets with a relatively upbeat tone. The Bank of Canada is an outlier among major central banks as it didn't cut rates last year in the face of slowing global growth.
Canada's central bank projected 1.3% annualized growth in the fourth quarter, but analysts say the economy expanded at a much weaker pace based on incoming data. Bank of Canada Gov. Stephen Poloz is scheduled to deliver remarks Thursday at an event in Vancouver, British Columbia.
"The November trade report revealed that Canadian trade continues to struggle, which does not bode well" for fourth-quarter output, said Benjamin Reitzes, economist at BMO Capital Markets. "Don't be surprised if we get a more cautious tone from Poloz in his fireside chat later this week."
He added that Canadian exports are on pace to drop nearly 10% annualized for the fourth quarter, and imports by 3.6%.
Canada's data agency said a strike in late November by 3,200 conductors and rail yard workers at Canadian National Railway Co., the country's biggest railroad, played a significant role in declines in exports and imports for November. Exports carried by rail were the lowest for November since 2013, according to the agency's calculations.
The CN strike provides a reason "to dismiss at least some of the weakness in November trade flows," said Nathan Janzen, an economist at Royal Bank of Canada. He added, though, that the disappointing trade data come on the heels of a soft run of economic numbers, including a sizable drop in employment in November.
Seven of 11 export sectors tracked recorded declines in November, the data agency said, with a 7.4% decline in energy products driving the overall decrease. The drop in energy, Canada's biggest export, was affected by the rail strike but also by a rupture in the Keystone pipeline.
On an annual basis, exports rose 1.9% in November from a year earlier. Meanwhile, 10 of the 11 components tracked for imports dropped in the month. Imports fell 0.3% in November from a year earlier.
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