Current account surplus exceeds expectations
By Ottawa Business Journal Staff
Tue, May 30, 2006 8:00 AM EST
Canada's current account surplus with the rest of the world dropped $2.4 billion in the first quarter of 2006 to $10.7 billion, but remained well ahead of economists' forecasts.
Statistics Canada says the decline was mostly the result of a sharp drop in the value of energy exports, which were very high in the fourth quarter of 2005.
The surplus on trade in goods fell by $3.3 billion to $17.2 billion in the first quarter, as lower prices for natural gas tempered Canada's exports of energy products. Imports dropped more modestly in the quarter as the volume of crude oil purchases declined.
Exports of goods fell $4.7 billion in Q1, due largely to energy exports, which declined by $4 billion. In the first quarter, prices of natural gas decreased by nearly 30 per cent after strong increases during the prior six months.
During the last three quarters, the value of energy products has represented, on average, more than 20 per cent of all exports, compared to less than 16 per cent in 2004.
Automotive product exports were down by $1 billion in the first quarter.
Total imports of goods declined by $1.4 billion and again energy products accounted for the largest share. However, the drop in imports of energy products came mainly from lower volumes, not through lower prices.
Following two strong quarters, profits earned by foreign direct investors decreased by $2.4 billion in the first quarter of 2006. Lower profits in the energy sector accounted for half of the drop.
The deficit on trade in services rose for the fourth time in the last five quarters, up $200 million to $1.8 billion. The $1.8-billion deficit in travel was the largest in 14 years.
Canadian investors bought a record amount of foreign securities in Q1. Over half of the $19 billion investment in the first quarter was in foreign bonds, as investors took advantage of the elimination of foreign content limits on RRSPs.
Some $9.9 billion flowed into foreign bonds, mostly U.S. treasuries and corporate bonds. Canadians also purchased $8 billion of foreign equities in the first quarter, the second highest quarterly investment in the past four years. Over four-fifths went to buy U.S. shares.
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