Canada posts higher than expected trade deficit in September

Canada posted a higher than expected trade deficit of C$1.26 billion ($908 million) in September as a drop in imports failed to offset a fall in exports, data showed on Tuesday.

The September data was its seventh straight monthly trade deficit, primarily led by lower exports to major trading countries other than its biggest trading partner the United States, Statistics Canada said.

Due to an ongoing digital transition at Canada Border Services Agency Assessment and Revenue Management, from where Statscan gets most of its trade data, results for September include greater use of estimation.

Analysts polled by Reuters had predicted a deficit of C$800 million and Statscan revised sharply the August trade deficit to C$1.47 billion from C$1.1 billion.

The biggest hit to exports, which fell by 0.1%, came from a 5.4% drop in shipments of metal and non-metallic mineral products, led by a 15.4% slump in the unwrought gold category.

Lower prices of metals and energy products were behind the monthly decrease in exports with the total exported goods prices dropping 1.5%, Statscan said, adding that in volume terms exports rose 1.4%.

Inbound shipments declined 0.4% in September but were largely flat in volume terms. Imports of metal and non-metallic mineral products decreased 12.7% and contributed the most to the overall decline.

The drop in imports largely reflect Canada's weak demand environment and sluggish growth prospects which have taken a hit under the impact of a 23-year high interest rate before the Bank of Canada started reducing it from June.

Since then, the BoC has cut its key policy rate at its four consecutive meetings to 3.75%.

The BoC will announce its next monetary policy decision on Dec. 11 with money markets bets showing a 47% chance of a 50-basis point cut.

The Canadian dollar firmed by 0.18% to 1.3876 to the U.S. dollar by 1333 GMT, or 72.07 U.S. cents. Yields on two-year government bonds were up 2.89 bps at 3.134%.

Total exports were at C$63.88 billion while imports were at C$65.14 billion.

Canada's trade surplus with the United States, which accounts for over three-quarters of its total exports, increased to C$8.29 billion in September from C$7.82 billion a month ago. Imports from the United States, which is 60% of all Canadian imports, rose 0.8% month-on-month.

($1 = 1.3882 Canadian dollars)