Canada’s merchandise imports and exports both declined in March, largely due to volume reductions, Statistics Canada said.

However, imports decreased more than twice as fast as exports leading to the widening of Canada’s trade surplus with the world from $262 million in February to $1.1 billion in March.

Imports fell 4.4% to $31.4 billion as most sectors posted decreases.

Imports have fallen by more than $8 billion since hitting a peak in July 2008, mainly due to declines in energy and automotive products.

The continuing decline implies that domestic consumer demand remains low, according to Dawn Desjardins, assistant chief economist at RBC Economics Research. “While the data suggest that the trade sector was supportive of growth in the quarter, it was due to another marked drop-off in imports, a worrying sign of weak Canadian demand,” she said.

Exports were down 1.8% to $32.5 billion in March, largely reflecting a decline in exports to the United States.

“The drop in exports emphasizes that global demand is still very weak,” commented CIBC World Markets economist Krishen Rangasamy, adding that the weaker export volumes could weigh on Canada’s real GDP growth in March.

Canada’s trade surplus with the U.S. remained at $3.6 billion in March, virtually unchanged from February.

South of the border

The U.S. trade deficit widened after seven consecutive months of decline.

U.S. exports fell to a 2004 low amid the global economic crisis, the U.S. Commerce Department data showed Tuesday.

The trade gap rose in March to a seasonally adjusted US$27.6 billion dollars, from a revised US$26.1 billion in February.

The overall U.S. trade deficit was smaller than expected on Wall Street. Economists had estimated a US$29.7 billion shortfall in March.

The U.S. deficit with China widened during March, to $15.62 billion from $14.2 billion in February.

Rangasamy expects trade volume to remain weak until broader global economic growth is restored, which is not likely to occur until late this year. In the meantime, higher current account deficits could impact the Canadian dollar, he said.

“Taking into account today’s report, the current account deficit for Q1 likely widened to roughly $9.5bn, and further deficits in Q2 and Q3 should put pressure on the C$ to give back some of its recent gains,” Rangasamy said.

IE