(Adds analyst reaction, details, Canadian dollar falling)
By David Ljunggren
OTTAWA, May 4 (Reuters) - Canada's trade deficit in March
widened to a record C$3.41 billion ($2.69 billion) as exports
sank for a second month on weak demand from the crucial U.S.
market, Statistics Canada said on Wednesday.
The deficit, far greater than a C$1.40 billion shortfall
forecast by analysts in a Reuters poll, came as Canada is
already struggling to deal with the prolonged effects of an oil
price slump.
Exports to the United States, which accounted for 74.2
percent of Canada's global total in March, fell by 6.3 percent
while imports dropped by 4.8 percent. As a result, Canada's
trade surplus with the United States dropped to a 22-year low of
C$1.53 billion, down from C$2.12 billion in February.
Peter Hall, chief economist at Export Development Canada,
described the drop in exports as a concern and linked it to a
drawdown in U.S. inventories which he said had cut demand for
Canadian goods.
"I wouldn't say this is time to push the panic button but
it's time to be alert. This is something that is coming to us
squarely from the United States," he said in a phone interview.
The Canadian dollar weakened to C$1.2821 to the U.S. dollar,
or 78.00 U.S. cents, down from C$1.2748, or 78.44 U.S. cents,
shortly before the release.
The Bank of Canada said on April 20 it could take Canada
more than three years to recover from the oil price shock. The
central bank is relying on a transition to non-energy exports to
help drive the economy.
March exports fell by 4.8 percent to C$40.99 billion, the
lowest in more than two years. Shipments declined in 10 of 11
sectors, led by motor vehicles and parts, consumer goods and
metal and non-metallic products.
"Certainly as we move through the second quarter the Bank
(of Canada) is going to be wanting to see indications of exports
rebounding," said Paul Ferley, assistant chief economist at
Royal Bank of Canada.
Imports decreased by 2.4 percent to C$44.40 billion, pulled
down by lower shipments of consumer goods, aircraft and other
transportation equipment.
March marked Canada's 19th consecutive monthly trade
deficit. Export prices dropped by 2.9 percent while volumes
declined by 2.0 percent. Import prices declined by 2.1 percent
and volumes shrank by 0.3 percent.
Statscan revised February's deficit to C$2.47 billion from
an initial C$1.91 billion.
($1=$1.27 Canadian)
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Graphic - Canada economic dashboard http://graphics.thomsonreuters.com/15/sc-canada/index.html
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(With additional reporting by Fergal Smith in Toronto; Editing
by Bernadette Baum and Meredith Mazzilli)