September 4, 2007

Canada's trade surplus grows as exports increase and imports shrink

Third quarterly increase but exports of auto are down

OTTAWA

Higher exports and lower imports helped push the country’s current account surplus up $2.2 billion to $8.4 billion in the second quarter.

Statistics Canada said the surplus on trade in goods rose $1.6 billion— the third consecutive quarterly increase — to $16.3 billion, the highest level since the fourth quarter of 2005.

After setting a record during the first quarter, imports shrank by $2 billion in the second quarter. Imports of machinery and equipment, automotive products and consumer goods all fell, largely due to lower prices.

Energy imports, however, rose by $1.1 billion from the previous quarter.

The current account covers transactions on goods, services, investment income and current transfers. Exports and interest income are receipts, while imports and interest expenses are payments.

The balance of these transactions determines if the current account is in surplus or deficit.

In the capital and financial account, growth in Canada’s foreign assets significantly outpaced that of international liabilities.

Exports of industrial materials increased by $1.4 billion, registering a seventh consecutive record high. However, this was offset by declines in exports of other goods, leaving total exports at virtually the same level as in the first quarter.

The increase in exports of industrial materials was mainly due to higher prices. Most of the increase was driven by shipments of things such as uranium, nickel and copper components, where prices rose, on average, by almost 30 per cent.

Exports of energy products rose $600 million, due to increased volume and higher prices for petroleum products and coal.

However, crude petroleum exports fell half a billion dollars during the second quarter.

The increases were offset by lower exports of automotive products, machinery and equipment.

Exports of cars, trucks and parts declined $1.5 billion to $19.4 billion.

The report said there has been persistent weakness in automotive exports recently, with the five lowest levels since the end of 1998 registered during the last five quarters.

As a result, General Motors of Canada Ltd. is cutting about 1,000 jobs at an Ontario truck plant next January, a move the Canadian Auto Workers Union says shows the effect of slumping U.S. housing and credit markets on the auto industry.

DCN NEWS SERVICES

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