Canadian Q3 Current Account Deficit Narrows To C$18.3 Billion

The third-quarter Canadian current account deficit declined to C$18.3bn from a revised C$19.0bn for the second quarter, which was originally reported as a C$19.9bn shortfall. This was the first decline for four quarters, but the deficit was significantly above the consensus forecast of a C$16.5bn deficit for the three-month period.

The deficit in goods and services declined to 8.3bn from the record deficit of C$11.0bn previously with exports registering the largest increase for over two years as oil exports recovered.

The deficit in services declined to C$5.3bn from C$5.5bn previously and the sixth successive quarterly decline as the travel deficit narrowed.

There was an increase in the income deficit to C$3.5bn from C$1.9bn previously with an increase in payments to overseas holders of Canadian securities.

The overall financial account remained strong with robust capital inflows as has been seen in the monthly portfolio flows data. For the third quarter, foreign investment in Canadian securities increased to C$33.6bn with strong inflows into the bond market.

The immediate balance of payments situation remains comfortable given robust capital inflows.

There will, however, be some concerns surrounding the investment account as a sustained deterioration would tend to weaken the balance of payments position. Inflows into domestic securities to fund the overall deficit will also tend to increase the income deficit over time and will pose a growing threat.

The Canadian dollar weakened after the data with USD/CAD at 1.3475 from 1.3455, although very choppy trading in oil was also having an important impact in buffeting the currency.


Tim is a contributing author to He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.