Canada’s trade surplus came in much weaker than expected for November.

The trade surplus came in $1 billion lower than economists expected, dropping $0.8 billion in the month to $4.1 billion. October’s result was also revised downward. ‘Contagion linked to slumping world demand continues to dent Canada’s export sector. Against a soft global demand backdrop, it was difficult to find even a hint of good news in today’s merchandise trade report,” comments CIBC World Markets.

Exports dropped 2.2%, with every sector declining. Food, machinery & equipment, and autos were notably soft, notes BMO Nesbitt Burns. In contrast, imports dipped just 0.1%.

“The November result is below the average monthly surplus in 2002 of $4.5 billion. Even so, the Q4 current account surplus is still likely to be around a $20 billion annual rate, just below $20.4 billion in Q3. This remains in total contrast with the US$500 billion U.S. current account deficit,” offers Nesbitt.

“The combination of Canada’s relatively strong domestic spending growth and soft demand from abroad is likely to put some downward pressure on the trade surplus in the year ahead. However, offsetting this is the fact that energy prices continue to rumble higher, and energy alone now accounts for more than 80% of the overall trade surplus. Thus, unless energy prices crack, we consider the latest dip in the trade surplus to be a blip, not the start of a trend,” Nesbitt says.

CIBC comments, “Today’s surprise evaporation in both exports and the resulting merchandise surplus will leave its mark on real GDP and the current account for Q4. We weren’t looking for much in the way of real export growth in Q4, but November’s dive means a negative growth reading for goods exports looks to be in the cards.”

“While not great news for the Canadian dollar, the decline in the trade surplus is also unlikely to break the currency’s upward trend,” concludes Nesbitt. “The overall trade picture remains healthy.”