Trade deficit creeps higher to $622M

Canadian imports slightly outpaced exports in August, causing Canada's trade deficit with the world to increase during the month.

Imports were up by 0.7 per cent, to $38.5 billion,while exports were 0.5 per cent higher, to $37.9 billion, Statistics Canada said Thursday.

As a result, Canada's trade deficit increased from $539 million in July to $622 million in August.

Prices higher

Price hikes not more units being sold were responsible for the increase on both sides. The volume of exports declined by 1.1 per cent, while prices were 1.6 per cent higher.

Exports to the U.S.declined 2.3 per cent,to $26.6 billion, while imports increased two percent,to $24.1 billion. That's the highest level for imports from the U.S. since October 2008, before the most recentrecession had begun in Canada.

As a result, Canada's trade surplus with the United States shrank from $3.7 billion in July to $2.5 billion in August.

Economists expect the growth in exports to continue for the next little while. "This is consistent with our view that economic growth will pick up modestly in the second half of this year," Toronto-Dominion Bank economist Leslie Preston said in a note.

But with a weakening U.S. and global economy, not to mention a strengthening Canadian dollar, the growth in exports is likely to slow somewhat.

"We do expect exports to continue to grow, helping Canada to avoid a technical recession. But with a modest pace of growth for the economy as a whole, and little expected improvement in the unemployment rate, it may not feel like it," Preston said.