Record Goods Gap Deepens Canada Current Account Deficit

Canada’s current account deficit widened to $17.5 bln ($69.9 bln a.r.) in Q1 from a revised shortfall of $13.1 bln in the prior quarter (previously $13.9 bln). The gap was narrower than expected in part due to the revision to Q4 and a larger-than-anticipated improvement in non-merchandise trade. Even so, the Q1 deficit is the second largest on record (on a nominal basis), behind only 2010Q3.The goods balance deficit widened sharply to a record $7.2 bln or $29 bln annualized, with the precipitous drop in oil prices doing serious damage. Meantime, the services deficit narrowed modestly to $5.6 bln, erasing the deterioration seen in the prior quarter. “Canada’s current account deficit widened sharply in Q1, but this should be as bad as it gets with higher oil prices, a weaker loonie and firming U.S. demand expected to drive some rebound in Q2. Even so, Canada still has a very long way to go before eliminating the current account deficit.” notes BMO Capital Markets 

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