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OTTAWA: Canada's imports showed their biggest monthly drop since 1991 in August, Statistics Canada said Friday, which analysts said pointed to weakening domestic demand and a gloomy outlook for the economy.
Overall, the trade surplus grew by 38 per cent in August from July but this was because of the sharp fall in imports. Exports also fell.
Imports fell 5.8 per cent in August to 37.3 billion Canadian dollars (31.5 billion US), in the first decrease since March, due to fewer purchases of foreign cars and energy products, said the government agency.
"The decline in imports was the largest percentage drop since December 1991," said Statistics Canada. "Total import volumes fell 6.9 per cent, while prices increased 1.1 per cent."
At the same time, exports fell 1.6 per cent to 43.1 billion dollars (36.4 billion US) in the first decline since December 2007. Export volumes were down 1.5 per cent, while export prices remained relatively unchanged.
Analyst Benjamin Reitzes from BMO Capital Markets said the fall in imports pointed to weakening demand by Canadian consumers, and he raised alarm about the outlook for exports given Canada's dependency on the rapidly slowing US economy.
"While the trade surplus widened in August, there was underlying weakness in the data with the plunge in imports hinting at weakening domestic demand," he said. "The outlook for exports isn't rosy either with the US likely in recession and commodity prices on the decline."
Canada's exports are highly dependent on oil and other commodities, the prices of which have fallen sharply in recent weeks amid mounting fears of a global economic recession.
Furthermore, the Canada dollar has weakened significantly, making imports more expensive. A weaker currency should help exporters however by making their products cheaper for foreign buyers.
After standing at parity to the US dollar in September, the Canadian unit is now at 0.8452 US dollars.
"Given the difficulties that exporters are facing - a weakening US economy and slower global demand for raw materials - everything leads us to believe that foreign trade will be an even bigger impediment to Canada's economic growth in the coming months," wrote analysts from the Desjardins bank.
- AFP/yt
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