‘The Bank of Canada has highlighted we’ve been here before, where things have looked good at the start of the year if only to melt away in the second half. They’ve noted they’re not going to make policy decisions on a short stretch of data.’ – Nick Exarhos, CIBC Capital Markets
Canada’s balance of trade turned negative for the first time since October 2016 in February, surprising markets and raising concerns about the overall health of the economy. Canada posted a trade deficit of C$972 million ($724) in February, following the preceding month’s downwardly revised surplus of C$421, Statistics Canada reported on Tuesday. Total exports’ value dropped 2.4%, the largest decline since March 2016. Yesterday’s data called to question Canada’s stronger than expected economic figures released in March. Thus, analysts started to doubt whether the Canadian economy managed to hit 2.5% growth in the Q1 of 2017 as predicted by the Bank of Canada. Moreover, following the release, analysts suggested that the Central bank would leave its monetary policy on hold at its April meeting next week, keeping the key interest rate at a record low of 0.50%. The data showed exports in the farm, fishing and food products sector fell 10.6%, whereas shipments of aircraft and transportation equipment dropped 15.2%. The largest declines were registered in shipments of aircrafts and canola, which contributes $26.7B to the Canadian economy each year. Exports to Canada’s southern neighbour, the United States, decreased 1.2%, while shipments to other countries plunged 5.9%.