Canadian Trade Surplus Falls to $4.2 Billion

All is not well in Canada. After economists had predicted that Canada's account surplus would be $6.1 billion, the reality was a surprise when it turned out to be a surplus of $4.2 billion in the second quarter of 2006. This is down more than $4 billion from the previous quarter, and obviously lower than analysts had predicted.

A drop of this nature is becoming a Canadian trend. This fall marks the second time in a row the account surplus has slipped since it hit a record peak of $13 billion in the fourth quarter of 2005. According to Statistics Canada, the reason for the poor showing was a lower surplus on trade goods.

Goods exported from Canada tumbled by $2 billion to $112.5 billion, while their imports into the country rose $1.8 billion to $99.7 billion. The end result of these circumstances is that the trade surplus on goods fell $3.8 billion to $12.8 billion.

The news was not much better in the service sector as the trade deficit grew by $300 million to $4.5 billion. StatCan put the blame on higher payments for transportation services. Deputy chief economist for BMO Nesbitt Burns Inc., Douglas Porter, stated in a note that the numbers show "Canada's underlying trade position continues to gradually deteriorate" and "the balance on the non-merchandise side is not improving as much as previously believed."

Mr. Porter went on to express how he did not believe that the current situation was the one that would be good for the Canadian dollar in the long run.