(Releads with analyst comments, details of release)
By David Ljunggren
OTTAWA, April 5 (Reuters) - Canada's trade deficit
unexpectedly jumped in February as exports dropped by the most
in almost seven years, reflecting the volatility still hampering
an economy hit by low oil prices.
Statistics Canada said on Tuesday the deficit hit C$1.91
billion ($1.45 billion), up from a C$628 million shortfall in
January. Market operators polled by Reuters had forecast a
deficit of C$900 million.
Exports dropped by 5.4 percent, the largest monthly decline
since May 2009, on lower shipments of consumer goods, energy
products and motor vehicles and parts.
The news disappointed analysts who had been encouraged by
strong exports in December and January and healthy growth in
January.
"Perhaps some pay back is to be expected after a dazzling
start to the year for the Canadian economy," said BMO Capital
Markets economist Robert Kavcic in a note to clients.
February marked the 18th consecutive monthly trade deficit,
reflecting the turmoil caused by low oil prices. Export prices
dropped by 3.2 percent while volumes declined by 2.2 percent.
Canada will take more than two years to adjust fully to the
drop in oil prices, a senior central bank official said last
week, signaling no quick end to the shock.
"The air is going out of the balloon to an extent after the
supposed optimism that we saw in January," said David Watt,
chief economist at HSBC Bank Canada.
"This just again highlights the vulnerability of the
Canadian economy right now. We don't have a lot of domestic
demand and if foreign demand wavers even an iota we're going to
have a challenge."
Imports decreased by 2.6 percent, pulled down by lower oil
imports. Overall, import prices slipped by 1.4 percent while
volumes shrank by 1.2 percent.
Exports to the United States, which accounted for 75.9
percent of Canada's global total in February, fell by 5.6
percent while imports dropped by 2.7 percent. As a result,
Canada's trade surplus with the United States slipped to C$2.68
billion from C$3.80 billion in January.
Export Development Canada chief economist Peter Hall said
the Canadian dollar had appreciated by 4.4 percent over the
month against the U.S. greenback, wreaking havoc with pricing.
"After two spectacular months this is a bit of a pull back,"
he said. "We're not looking at this and saying 'All is lost' ...
the fundamentals are still very strong in the United States."
($1=$1.32 Canadian)
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Graphic - Canada economic dashboard http://graphics.thomsonreuters.com/15/sc-canada/index.html
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(Editing by Chizu Nomiyama and Meredith Mazzilli)