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April trade figures to provide cold comfort, economists say

With Canada’s economy in slow-growth mode, the hope is that the global economy picks up the slack, so a lot is riding on the country’s export sector.


With the domestic economy in a slow-growth mode, a lot is riding on Canada's export sector.

The hope is that the global economy, and particularly the United States, eventually picks up the slack, driving the Canadian economy forward.

April's merchandise trade figures, due out Tuesday, could be cold comfort.

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The consensus among economists is for the trade balance to slip back into a deficit of $350-million, after a narrow $24-million surplus in March.

But forecasters are all over the map trying to explain why.

CIBC says higher commodity prices and auto production will offset lower energy exports, due to maintenance affecting Alberta's oil patch.

Toronto-Dominion Bank, on the other hand, expects lower auto exports, weaker prices for many commodities and faltering demand for lumber.

Bank of Montreal senior economist Benjamin Reitzes is going completely against the grain, predicting that the trade figures will stay positive for a second straight month – the first time that's occurred in more than a year.

Mr. Reitzes is calling for higher exports of lumber, oil and consumer goods.

One month rarely tells the story.

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And for most of the past year, trade has been a drag on the economy due to the sluggish U.S. recovery, weak global demand, slipping commodity prices and the still relatively high Canadian dollar, which makes Canada's exports more expensive.

Until any, or all, of those factors change, exports aren't likely to drive Canada's economy.

"Looking forward, the transition in the near term is likely to be uneven, particularly as fiscal constraint in the U.S. acts as a hurdle to Canada's export recovery," TD economist Diana Petramala said a research note. "However, as the year progresses, improving U.S. residential construction, auto demand and business investment will support a pick-up in Canada's manufacturing and resource sector and overall economic growth."

Regardless of what the April trade numbers show, there are tentative signs of some movement in the right direction. The Canadian dollar is drifting lower – to less than 97 cents (U.S.) from a peak of $1.03 in September. Some economists expect the dollar to fall to 90 cents or below by next year.

That alone could lift the trade into a surplus that endures.

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