Canada's balance of international payments, first quarter 2012

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Canada's current account deficit (on a seasonally adjusted basis) expanded by $0.6 billion to $10.3 billion in the first quarter, as a lower surplus on goods was partly offset by a lower deficit on investment income.

In the capital and financial account (unadjusted for seasonal variation), increased foreign direct investment in Canada was the major contributor to the inflow of funds to the Canadian economy in the quarter.

Current account

Chart 1 
Current account balances
Chart 1: Current account balances

Chart description: Current account balances

CSV version of the chart

Goods surplus declines on weaker exports

The overall goods surplus was down $1.3 billion in the first quarter. This reflected lower exports, as imports were largely unchanged. However, the surplus with the United States widened by $1.1 billion, reaching its highest level since the third quarter of 2008, led by increased exports of energy products.

Chart 2 
Goods balances by geographic areas
Chart 2: Goods balances by geographic areas

Chart description: Goods balances by geographic areas

CSV version of the chart

Total exports of goods declined $1.3 billion to $120.2 billion. Industrial goods exports were down $1.8 billion. Precious metals accounted for $0.7 billion of this decline, following record exports in the fourth quarter in 2011. Exports of machinery and equipment fell by $1.1 billion on lower volumes and prices. These declines were partly offset by stronger exports of energy products, reflecting higher volumes. This was due to record sales of crude petroleum, moderated by lower sales of natural gas. Natural gas prices continued to decline, down 40% during the last two quarters, leading to the lowest current-dollar exports of that product since 1997.

Imports of goods remained at $117.8 billion in the first quarter. Automotive products were up $1.4 billion, as a result of higher volumes of imported cars and trucks. Industrial goods fell $0.7 billion, mostly on lower imports of precious metals. Consumer goods and machinery and equipment imports also declined in the quarter.

Deficit on services edges up

The overall deficit on trade in services rose $0.2 billion to $6.2 billion in the first quarter. This reflected small changes across the components of trade in services. Lower receipts in cross-border transportation led to a $0.2 billion increase in the transportation services deficit. Spending by foreign travellers in Canada was up $0.1 billion, resulting in a reduction of the same amount in the travel deficit. The surplus on commercial services edged down $0.1 billion, as imports rose slightly more than exports.

Investment income deficit narrows on lower payments

The deficit on investment income was down $0.8 billion to $5.7 billion in the first quarter. This largely reflected a reduction in the income payment flows on foreign investment. Profits earned by non-resident corporations on their direct investment in Canada declined $1.1 billion in the first quarter, following a peak in the previous quarter. Earnings on Canadian direct investment abroad decreased slightly to $10.3 billion in the first quarter, remaining close to the high of $10.6 billion reached in the fourth quarter of 2010.

Capital and financial account

Lowest foreign acquisition of Canadian securities in over three years

Foreign investors acquired $6.3 billion of Canadian securities in the first quarter, down from an investment of $27.2 billion in the previous quarter. Non-residents continued to invest in bonds but reduced their holdings of other instruments in the quarter. This resulted in the lowest amount invested by non-residents in Canadian securities in more than three years.

Non-resident investors purchased $14.8 billion of Canadian bonds in the first quarter, a 13th straight quarter of acquisition. Foreign investment targeted Canadian dollar-denominated bonds issued by the federal government and its enterprises. However, foreign holdings of Canadian money market instruments were down $7.7 billion, following a $26.0 billion increase in the second half of 2011. The reductions were focussed in Government of Canada Treasury bills, and reflected retirements as well as reduced purchases by foreign investors.

Non-residents sold $810 million of Canadian equities in the first quarter, marking the first such divestment in two years. The reduction was led by sales on the secondary market. New issues of Canadian shares to non-residents resulting from merger and acquisition activity moderated the decrease in holdings of Canadian equities by foreign investors. Canadian stock prices were up 3.7% in the first quarter, compared with a 12% increase in US stock prices.

Canadian portfolio investment abroad focussed on equities

Canadian investment in foreign securities reached $6.6 billion in the first quarter and was attributable to equities. Acquisitions of $10.2 billion of foreign shares, led by pension plans, were partially offset by a divestment in debt securities. Canadian holdings of both short- and long-term debt instruments were down in the quarter.

Chart 3 
Foreign portfolio investment1
Chart 3: Foreign portfolio investment

Chart description: Foreign portfolio investment

CSV version of the chart

Canadian investment in foreign securities exceeded foreign investment in Canadian securities in the first quarter. This led to a net outflow of funds on the portfolio investment account in the balance of payments, the first since 2008. During the period from 2009 to 2011, inward portfolio investment had largely contributed to the financing of Canada's current account deficits.

Foreign direct investment in Canada strengthens

Foreign direct investors injected $14.6 billion worth of funds into the Canadian economy in the first quarter, up from $3.0 billion in the previous quarter. Mergers and acquisitions accounted for most of the activity and were focussed in the energy and metallic mineral sector of the Canadian economy.

Chart 4 
Foreign direct investment in Canada
Chart 4: Foreign direct investment in Canada

Chart description: Foreign direct investment in Canada

CSV version of the chart

Canadian direct investment abroad slowed to $8.5 billion. Outward direct investment in the quarter reflected profits reinvested in foreign affiliates by Canadian direct investors as well as cross-border merger and acquisition activity. Investment was concentrated in the resource and finance sectors.

Transactions in the other investment account add to the inflows

The other investment category of the financial account, mainly comprised of loans and deposits, contributed to a net inflow of $6.0 billion in the first quarter. Funds repatriated from abroad through a reduction in deposits held by Canadians accounted for the bulk of the activity. The fifth straight quarter of increase in Canada's official international reserves moderated these inflows.

Note to readers

Each year, revisions extending back three years are made with the publication of first quarter data. With the Canadian System of National Accounts 2012 Historical Revision, scheduled for release beginning in October 2012, the publication of the first quarter 2012 data includes revisions extending back only one year.

The balance of international payments covers all economic transactions between Canadian residents and non-residents in two accounts, the current account and the capital and financial account.

The current account covers transactions in goods, services, investment income and current transfers.

The capital and financial account mainly comprises transactions in financial assets and liabilities.

In principle, a current account surplus/deficit corresponds to an equivalent net outflow/inflow in the capital and financial account. In practice, as international transactions data are compiled from multiple sources, this is rarely the case and gives rise to measurement error. The statistical discrepancy is the unobserved net inflow or outflow.

For more information about the balance of payments, consult the "Frequently asked questions" section in the National economic accounts module of our website. The module also presents the most recent balance of payments statistics.

Available without charge in CANSIM: tables CANSIM table376-0001 to 376-0017 and CANSIM table376-0035.

Definitions, data sources and methods: survey numbers survey number1534, survey number1535, survey number1536 and survey number1537.

The first quarter 2012 issue of Canada's Balance of International Payments (Catalogue number67-001-X, free) will soon be available.

The balance of international payments data for the second quarter will be released on August 30.

For more information, contact Statistics Canada's National Contact Centre (toll-free 1-800-263-1136; 613-951-8116;

To enquire about the concepts, methods or data quality of this release, contact Denis Caron (613-951-1861; or Éric Boulay (613-951-1872;, Balance of Payments Division.