-Silvana Dimino, JPMorgan's Canada economist
Canada reported the biggest current account deficit in a year in the fourth quarter, as declining energy exports affected the country's trade balance. The current account shortfall swelled to C$13.92 billion from a downwardly revised C$9.6 billion gap in the September quarter, Statistics Canada said. Canada's export sector struggled in the reported period, as it contracted by C$3.4 billion, led by energy component, which showed the deteriorating results due to a collapse in crude prices. Meanwhile, exports surged by C$1.5 billion. The balance of international trade in goods posted a $2 billion deficit during the quarter, the first gap in a year. Surplus with Canada's top trading partner, the US, dropped to the lowest level in four years, down by C$4.2 billion amid weak crude petroleum sales, while the trade gap with China surged to the highest level in six years, reflecting stronger imports.
Canada's resource-dependent economy will continue to struggle due to the sting of a slump in oil prices until mid-2015 at least, when exporters may begin to benefit from stronger US growth and a weaker Canadian Dollar. However, Governor Stephen Poloz said on the Bank of Canada took the right amount of insurance with its January rate cut. Still, economists expect another rate cut in March in case of a sharper slowdown in growth.
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