UPDATE 2-Canada exports up in November, but imports edge down

(Recasts, adds analyst comments, Canadian dollar reaction)

OTTAWA, Jan 7 (Reuters) – Canada’s exports rose in November, while imports edged down, with the country’s trade deficit with the world narrowing slightly more than expected, data from Statistics Canada showed on Thursday.

The trade deficit narrowed to C$3.34 billion ($2.63 billion) in November, slightly ahead of analyst expectations of C$3.5 billion, while October’s trade deficit was revised to C$3.73 billion.

“While the trade deficit narrowed, it remains notably wider than pre-pandemic levels,” said Benjamin Reitzes, Canadian Rates & Macro Strategist at BMO Capital Markets Economics, in a note.

Reitzes added that higher oil prices in December and into 2021 will likely help shrink the gap over the coming months.

There was little market reaction to the data, with the Canadian dollar trading down 0.3% at 1.2715 to the greenback, or 78.65 U.S. cents, as the U.S. dollar gained against a basket of major currencies.

Exports rose 0.5%, mostly on higher gold exports to the United Kingdom, but were still C$1.5 billion below February levels, Statistics Canada said. While there was an overall gain in exports, seven of the 11 product sections posted declines.

Imports, meanwhile, decreased 0.3%, the first decline since May, mostly on lower imports of industrial machinery, equipment and parts. Despite the slight decline, imports remained above pre-pandemic levels, the data showed.

The recent strength of the Canadian dollar will make imports cheaper and support a narrower trade balance in the near term, said Royce Mendes, senior economist at CIBC Capital Markets.

“But the Bank of Canada will be concerned with how much of a headwind the loonie’s appreciation is to the competitiveness of the country’s exports,” Mendes said in a note.

Exports to the United States, Canada’s largest trading partner, fell by 2.2% while imports edged up 0.3%. As a result, the trade surplus with the United States narrowed to C$2.3 billion in November from C$3.1 billion in October.

($1 = 1.2706 Canadian dollars)

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