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The Globe and Mail

Exports need lower loonie to move into economy’s driver’s seat

A man holds Canadian currency in this posed photograph in Toronto, October 22, 2008.


It's now apparent that it will take a significantly cheaper Canadian dollar for exports to start driving the Canadian economy.

Canada's trade deficit widened to a larger than expected $567-million in April as exports fell 0.2 per cent and imports rose 1.2 per cent, Statistics Canada reported Tuesday.

Exports were down in roughly half the categories Statscan tracks, including energy, metal ores, industrial machinery and aircraft.

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What had been a small surplus in March was revised down to a $3-million deficit.

The result is that April marked a 16th consecutive monthly trade deficit.

"April's results point to an uneasy transition to an export-led growth path," Toronto-Dominion Bank economist Jonathan Bendiner said in a research note.

With the domestic economy slowing, economists and policy makers have been looking for exports to pick up the slack.

Economists took some consolation that export volumes were up 0.7 per cent in April, marking a second consecutive healthy monthly gain.

The dollar is now trading at roughly 97 cents (U.S.), down from slightly above par through the first few months of the year.

Many economists are predicting the dollar to continue to depreciate over the next few months.

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That should eventually help spur exports.

"We expect the loonie to depreciate over the course of 2013 which should provide a helping hand to Canadian exporters," the TD's Mr. Bendiner said.

But it's tough to fight a stalling global economy. Exports fell to virtually every part of the world, except the U.S., in April.

And that's reflected in the trade balance. Canada enjoyed a $3.9-billion surplus with the U.S. in April, but a $4.4-billion deficit with the rest of the world.

"The steady unspectacular pace of U.S. economic growth should continue to support Canada's exports this year, but the pace will be moderate and partially offset by much weaker foreign demand," said economist David Madani of Capital Economics.

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