- Daniel Hui, J.P. Morgan Securities
Canada's current account deficit shrank in the third quarter to the smallest level this year amid an increase in merchandise exports. The current account gap narrowed to C$16.21 billion in the third quarter from C$16.57 billion in the three months through June, sharply revised from an initially reported C$17.40 billion. Canada's trade are benefiting from a weaker currency that has supported the nation's exporters. The Canadian Dollar has lost 13% so far this year, making it one of the worst performers among major currencies. Canada's exports rose by C$4.7 billion and imports increased by C$3.4 billion. The biggest export gains were in consumer goods and autos categories. Meanwhile, lower exports of energy products offset some of the gains. Improving exports are key for the Canadian economy after the Bank of Canada said that recovering exports will drive the economic recovery in the second half of the year.
In response to persistent slack in the Canadian economy, the central bank maintained its interest rate at 0.5% back in October. It also revised third quarter growth projections from 1.5% to 2.5%, while still voicing cautious optimism. The next BoC interest rate announcement is scheduled for Wednesday.
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