Canada records bigger-than-expected trade deficit of $657.6 mn in Oct

Canada recorded a bigger-than-expected trade deficit of C$924 million ($657.60 million) in October, its eighth straight monthly trade shortfall, as exports could not overtake imports despite its first rise since June, data showed on Thursday. 

Analysts polled by Reuters had forecast a C$790 million deficit in the month. September's trade balance was revised to a C$1.3 billion deficit from C$1.26 billion reported initially. 

Total exports rose 1.1 per cent in October, mainly due to metal and non-metallic mineral products, while imports were up by 0.5 per cent, led by increases in metal ores and non-metallic minerals and energy products, Statistics Canada data showed. 

Exports rose after three straight months of declines despite eight of the 11 export product sections being down, Statscan said, adding that higher prices were partly responsible for the monthly increase in exports. 

Excluding the exports of metal and non-metallic mineral products product section, total exports decreased 0.2 per cent in the month. 

Data last week showed the Canadian economy underperformed the central bank's third-quarter growth forecast, and likely started the fourth quarter with a small growth in October. 

The Bank of Canada has reduced borrowing costs by 125 basis points since June to 3.75 per cent as the inflation rate eased to its 2 per cent target, but the bank has grown more concerned about a slowing economy. 

The Canadian dollar slightly firmed after the trade data and was trading up 0.23 per cent to 1.404 to the US dollar, or 71.23 US cents. Yields on two-year government bonds were up 4.4 basis points to 3.129 per cent. 

Bets for a 50 basis point rate cut have shrunk since last week and currency markets now see just over 36 per cent chance of a bigger rate cut on Dec. 11. A 25 basis point reduction in interest rate is fully priced in.   

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