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Canada's balance of international payments, third quarter 2014

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Released: 2014-11-27

Canada's current account deficit (on a seasonally adjusted basis) narrowed by $1.5 billion in the third quarter to $8.4 billion. This reduction reflected a higher goods surplus and lower services and investment income deficits.

In the financial account (unadjusted for seasonal variation), foreign direct investment strengthened and was the largest contributor to the inflow of funds in the economy in the quarter.

Chart 1  Chart 1: Current account balances - Description and data table
Current account balances

Chart 1: Current account balances - Description and data table

Current account

The goods surplus expands for a third straight quarter

The balance on international trade in goods expanded by $0.6 billion to $2.9 billion in the third quarter, a third straight surplus following eight quarters of deficits. On a geographical basis, the surplus with the United States was down by $1.5 billion to $12.8 billion, as imports increased more than exports. Lower prices on energy products dampened the value of exports to the United States in the quarter. This was more than offset by changes in the goods balances with non-US countries.

In particular, there was a larger surplus with the United Kingdom, which reached $2.7 billion. Canada also posted lower goods deficits with China, which remains the largest goods deficit country at $3.3 billion, as well as with Hong Kong and Saudi Arabia. Moderating these developments, the deficits with Mexico and Switzerland both expanded in the quarter.

Chart 2  Chart 2: Goods balances by geographic areas - Description and data table
Goods balances by geographic areas

Chart 2: Goods balances by geographic areas - Description and data table

Total exports of goods rose $1.9 billion to $135.0 billion, despite a decline in energy products. The largest gain was in the metal and non-metallic mineral products category (up $1.3 billion), led by higher volumes of precious metals. Motor vehicles and parts, aircraft, other transportation equipment and parts as well as consumer goods were all up $0.4 billion on higher volumes. Exports of energy products declined by $1.1 billion, as prices of crude petroleum were down but volumes continued to expand.

Overall imports of goods were up $1.3 billion to $132.1 billion in the quarter. Metal and non-metallic mineral products increased $0.5 billion, with higher volumes of precious metals accounting for half of the gain. Imports of energy products were up $0.4 billion on higher volumes of crude petroleum and refined petroleum products. Volumes of natural gas imports declined in the third quarter from their peak in the previous quarter.

The deficits on services and investment income narrow

The deficit on international transactions in services narrowed $0.2 billion in the third quarter to $5.7 billion. This mainly reflected a lower travel deficit. Lower spending by Canadians travelling in the United States was the main factor behind the $0.2 billion decline in the travel deficit, which reached $4.4 billion. The transport services deficit edged down in the quarter, as receipts were up more than payments.

The investment income deficit decreased $0.4 billion to $4.8 billion. Profits earned abroad by Canadian direct investors increased by more than those earned in Canada by foreign direct investors. At the same time, payments of interest and dividends on foreign holdings of Canadian securities were up, which moderated the reduction in the investment income deficit.

Financial account

Foreign portfolio investment in Canada continues to focus on private corporate securities

Foreign investors added $19.9 billion of Canadian securities to their holdings in the third quarter, down from a $31.4 billion acquisition in the second quarter. This activity favoured securities from the private corporate sector.

Non-residents added $11.6 billion of Canadian equities to their holdings in the third quarter, largely from secondary market purchases. This was the highest investment so far in 2014. Foreign investors have added Canadian stocks to their portfolios for six consecutive quarters, for a quarterly average investment of $9.5 billion over this period.

Foreign investment in Canadian bonds amounted to $11.4 billion in the quarter, with most of the activity in new issues of private corporations recorded in September. Foreign investors also purchased $3.4 billion of Canadian government bonds, following five consecutive quarters of divestment in these instruments. At the same time, foreign investors withdrew $3.2 billion from the Canadian money market in the third quarter, following a $7.2 billion investment in the second quarter. The divestment was largely composed of retirements, and was evenly split between federal Treasury bills and private corporate paper.

Canadian investment in foreign securities increases

Canadian investment in foreign securities picked up in the third quarter to reach $18.3 billion. This activity was the largest since the second quarter of 2007, just before the onset of global credit concerns. The purchases were almost evenly split between foreign bonds and foreign shares, but were moderated by a divestment in foreign money market securities in the quarter.

Canadian acquisitions of foreign equities of $10.4 billion marked the third consecutive quarter of relatively strong investment in foreign stock markets. This activity was mainly focused on non-US foreign shares, with investment in these instruments at its highest level since the fourth quarter of 2000.

In addition, Canadian investors purchased $10.2 billion of foreign bonds, mainly US bonds. At the same time, they reduced their holdings of foreign money market by $2.3 billion in the third quarter.

Chart 3  Chart 3: Canadian investment in foreign securities - Description and data table
Canadian investment in foreign securities

Chart 3: Canadian investment in foreign securities - Description and data table

Direct investment strengthens and generates an inflow of funds

Cross-border foreign direct investment activity resulted in a net inflow of funds in the third quarter, as foreign direct investment in Canada outpaced Canadian direct investment abroad for a fourth straight quarter.

Foreign direct investment in Canada reached $17.2 billion, the highest level since the second quarter of 2013. Funds injected into existing Canadian subsidiaries accounted for most of the investment, as inflows from cross-border mergers and acquisitions slowed. On an industry basis, foreign direct investment in the country was mainly directed to the energy and mining as well as the manufacturing sectors.

Canadian direct investment abroad strengthened to $13.5 billion in the third quarter, up from $6.6 billion in the second quarter. Outflows related to cross-border mergers and acquisitions were at their highest level in a year, with one-third of these investments placed in the United States.

Chart 4  Chart 4: Foreign direct investment  - Description and data table
Foreign direct investment

Chart 4: Foreign direct investment  - Description and data table

  Note to readers

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

The current account covers transactions in goods, services, compensation of employees, investment income and secondary income (current transfers).

The current account data in this release are seasonally adjusted. For more information on seasonal adjustment, see Seasonally adjusted data – Frequently asked questions.

The capital account covers capital transfers and transactions in non-produced non-financial assets.

The financial account covers transactions in financial assets and liabilities.

In principle, a net lending (+) / net borrowing (-) derived from the sum of the current and capital accounts corresponds to a net lending (+) / net borrowing (-) derived from the financial account. In practice, as data are compiled from multiple sources, this is rarely the case and gives rise to measurement error. The discrepancy (net errors and omissions) is the unobserved net inflow or outflow.

Change to annual revision practices

The Canadian System of macroeconomic accounts is implementing a new revision policy. Annual and quarterly revisions for Canada's international balance of payments for reference years 2011 to 2014 now take place in November at the time of the third quarter release rather than May, as was previously the practice. For more information, see Latest Developments in the Canadian Economic Accounts (Catalogue number13-605-X). In general, the revisions reflect more current sources of information coming from annual surveys and administrative data.

New details on trade in goods and services

With this release of the balance of international payments, expanded geographical details on trade in goods and trade in services data are available from the first quarter of 1997.

For more information on the expanded geographic detail, refer to "Balance of Payments trade in goods at Statistics Canada: Expanding geographic detail to 27 principal trading partners."

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

The balance of international payments data for the fourth quarter of 2014 will be released on March 2, 2015.

Contact information

For more information, contact us (toll-free 1-800-263-1136; 514-283-8300;

To enquire about the concepts, methods or data quality of this release, contact Denis Caron (613-951-1861;, International Accounts and Trade Division.

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