By Joshua Michelson

OTTAWA (MNI) – Canada’s international goods trade surplus is
expected to have narrowed in October, possibly almost by C$1.0 billion,
to C$0.3 billion, Statistics Canada is expected to report Friday.

Economists surveyed by Market News International, using the median
expectation, estimated a C$0.3 billion surplus, a major decrease from
September’s C$1.25 billion. However, individual surplus expectations
range between C$0.2 billion and C$0.8 billion, showing some uncertainty
in how imports and exports were affected for the month.

This year saw Canada posting trade deficits March through to
August, with September’s surplus reversing the trend on increased
strength in exports over imports. October is to see this reverse once
again with the Rates and FX strategy group at TD Economics estimating a
1.8% growth in imports, compared to a modest 0.2% growth in exports.

The Strategy group at TD Economics further believes supply chain
disruptions stemming from the floods in Thailand have impacted
production in the auto sector as well as assisted in the appreciation of
the Canadian dollar.

Michael Gregory, economist with BMO Capital Markets, told clients
that on the high end of those surveyed was a C$0.8 billion surplus. He
cited strong energy sales that would benefit the exports total, albeit
against a background of slowing economic growth. Gregory saw a
decrease in Canadian business confidence affecting hiring and capital
spending. This slowing of capital spending restrains imports,
contributing to his higher surplus expectation.

Krishen Rengasamy, senior economist with National Bank Financial,
said in an interview with MNI that he believes September’s surplus of
C$1.25 billion will be approximately halved for October. He said,
“Commodity prices have softened quite a bit in September and October so
the energy trade surplus may follow suit, which may be partially offset
by a decrease in the auto trade deficit given the high sales seen in the
United States.”

When looking at generating these expectations, Krishen looks at
prices in both commodities and non-commodities and also the health of
the global economy. The state of the world economy has a major impact
on the volume of trade, which is then either magnified or shrunk by
either increasing or decreasing prices.

Emanuella Enenajor, an economist with CIBC Economics, wrote to
clients about the lowest surplus expectation of those surveyed by MNI, a
mere C$0.2 billion. Enenajor also mentioned decreasing pressure on
energy related exports, but believes industrial goods trade to have
increased, supported by U.S. industrial production. The reason for the
low forecast mostly has to do with an expected increase in imports, more
in line with the still growing economy. Recent import demand has been
weak and Enenajor believes this may have been corrected in October,
given a still growing economy.

Looking forward, both Enenajor and Rengasamy had a similar view on
Canada’s trade balance in that it will likely continue to weaken and
perhaps return to a deficit position. Contributing factors include the
expected continued strength of the Canadian dollar, less demand from
trading partners under slowing economies, and resource prices facing
downward pressure.

–Joshua Michelson is a reporter for Need to Know News in Ottawa

** Market News International – Ottawa **

[TOPICS: M$C$$$,MAUDS$]