Source: The Canadian Press

Canada’s trade deficit with the world rose to $2.5 billion in September, the fifth consecutive month in the red for the country’s trade balance.

CIBC economist Emanuella Enenajor noted the weakness underscores the challenges facing the Canadian economy in coming quarters as global growth slows and the weak recovery continues in Canada’s biggest trading partner, the United States.

As well, a rising loonie that has hit parity this week will add to pressure on exporters, making their goods more expensive in the U.S. market and squeezing sales.

“Given the lagged impact of a stronger loonie which has weakened the competitive position of Canadian exporters, further strength in the Canadian dollar will only make the picture grimmer,” Enenajor wrote in a report.

“With U.S. growth still quite tepid, trade will continue to act as a drag on Canadian GDP.”

The economy’s growth — and its ability to create more jobs to lower the 7.9% jobless rate — depends on three main pilllars, exports, consumer spending and government spending.

With exports falling, and governments and consumers likely to restrain their spending to deal with budget deficits and consumer debts, it’s expected that growth in the economy will be sluggish over the next year or so, at least until there’s a stronger recovery in the United States.

The trade deficit increase increase compared with a $1.5 billion deficit in August as merchandise exports fell and imports rose.

Statistics Canada reports merchandise exports declined 1.7% to $33.1 billion in September, while export volumes fell 2.2% and prices increased 0.5%.

Exports to the United States fell 3.6% to $23.9 billion, their lowest level since November 2009. Imports from the U.S. increased 1.6%. As a result, Canada’s trade surplus with the United States narrowed to $1.6 billion in September from $2.9 billion in August.

TD Bank economist Diana Petramala said the trade picture will continue to look bleak with the slow U.S. recovery.

“A second round of quantitative easing in the U.S. may provide a slight lift to Canadian export growth,” Petramala said.

“However, the impact is expected to be marginal as any positive demand impact will likely be offset by a strong Canadian dollar — which has reached parity since the announcement of the additional monetary stimulus last week.”

Exports to countries other than the United States increased 3.6%, their third straight monthly gain, while imports rose 0.5. Canada’s trade deficit with countries other than the United States declined to $4.1 billion in September from $4.3 billion in August.

Automotive products, other consumer goods as well as industrial goods and materials were the main factors behind the decline.

Machinery and equipment exports increased during the month.

Imports rose 1.2% to $35.6 billion, the highest level since November 2008, as import prices rose 1.1%.

Industrial goods and materials and machinery and equipment, the two largest import sectors, recorded gains in September.