Canada's balance of international payments, second quarter 2024
Released: 2024-08-29
-$8.5 billion
Second quarter 2024
Canada's current account balance (on a seasonal adjusted basis) posted an $8.5 billion deficit in the second quarter, widening $3.1 billion from the previous quarter. This increase reflected a higher trade in goods deficit combined with a deterioration of the investment income balance and was partially offset by a lower trade in services deficit. The current account balance has now been in a deficit position for eight consecutive quarters.
In the financial account (unadjusted for seasonal variation), inflows of funds from abroad to finance the current account deficit came primarily from foreign investment in Canadian debt securities, as non-resident investors significantly increased their holdings of government bonds in the second quarter. Meanwhile, foreign direct investment in Canada also contributed to the inflows of funds and reached its highest level since 2007.
Current account
Goods deficit increases
The trade in goods and services balance posted a $5.4 billion deficit in the second quarter of 2024, a $1.1 billion increase from the first quarter. The growth was largely due to the larger increase in imports than in exports of goods.
The goods deficit amounted to $2.2 billion in the second quarter, up from a marginal deficit in the first quarter, while the services deficit narrowed from $4.3 billion in the first quarter to $3.2 billion in the second quarter.
Motor vehicles and parts leads the increase of goods imports
Imports of goods rose 2.0% to $196.1 billion in the second quarter. Imports of motor vehicles and parts (+5.3%) drove the increase, as imports of passenger cars and light trucks rose in the second quarter. Imports of metal products rose 8.1% to $16.1 billion and were also a significant contributor to the overall increase, mainly due to higher imports of gold. Partially offsetting these increases, imports of energy products declined 13.5% to $9.2 billion amid widespread decreases across most product groups, notably refined petroleum energy products (-14.2%).
Exports of goods increased 0.9% to $139.9 billion in the second quarter, largely due to higher exports of aircraft (+12.7%). Exports of motor vehicles and parts (-3.1%) fell for a fourth straight quarter moderating the overall increase in the quarter.
Trade in services deficit narrows on higher commercial services exports
The trade in services deficit narrowed by $1.1 billion to $3.2 billion in the second quarter, almost entirely due to an increase in the commercial services surplus.
Exports of commercial services were up 2.6% to $32.6 billion in the second quarter, led by higher receipts for management services, research and development, and maintenance and repair.
Imports of commercial services were down 0.9% to $30.1 billion in the second quarter, as computer services as well as scientific and technical services fell from highs in the first quarter.
The travel deficit narrowed slightly to $1.5 billion in the second quarter, as exports increased 0.5% while imports declined 0.8%, the first quarterly decrease since the second quarter of 2021. Meanwhile, the transportation deficit edged up to $4.1 billion in the second quarter of 2024.
Chart 1
Current account balances
Investment income surplus moves into deficit
The investment income balance moved into a slight deficit position of $0.6 billion in the second quarter, following a surplus of $1.3 billion in the first quarter. Profits earned by Canadian direct investors on their assets abroad decreased in the second quarter and led to a second consecutive decline in the direct investment income surplus. Meanwhile, earnings of foreign investors on their holdings of Canadian bonds increased by $1.4 billion to a record-high $18.3 billion.
Financial account
Foreign investment in Canadian securities increases significantly
Foreign investors acquired $67.3 billion of Canadian securities in the second quarter, the highest level of investment since the first quarter of 2022. The strong inflow of funds in the second quarter of 2024 was driven by investments in Canadian debt securities. Foreign acquisitions were mainly in the form of federal government bonds (+$28.6 billion), private corporate bonds (+$26.4 billion) and provincial government bonds (+$16.1 billion).
While increasing their exposure to the Canadian bond market, foreign investors reduced their holdings of Canadian shares by $8.4 billion in the second quarter, a sixth consecutive quarter of divestments. The reduction in the second quarter was driven by redemptions of portfolio shares resulting from merger and acquisition activities.
Chart 2
Foreign portfolio investment
Meanwhile, Canadian investors acquired $20.7 billion in foreign securities in the second quarter, down from a $51.5 billion investment in the first quarter. Investors largely favoured foreign bonds (+$19.0 billion) in the second quarter.
In contrast, they reduced their exposure to foreign equity markets by $0.4 billion in the second quarter, following strong acquisitions in the previous three quarters.
Direct investment in Canada at its highest level since 2007
Foreign direct investment in Canada reached $38.5 billion in the second quarter, following a rare divestment in the first quarter. Merger and acquisition activities (+$21.2 billion) contributed the most to the investment, reaching the highest level since the fourth quarter of 2007.
The Canadian manufacturing (+$8.7 billion) and energy and mining (+$8.3 billion) sectors were the top recipients of foreign direct investments. More than half of the total direct investment originated from the United States.
Chart 3
Foreign direct investment
Canadian direct investment abroad reached $21.2 billion in the second quarter, following a $29.2 billion investment in the previous quarter. Earnings reinvested in foreign affiliates by their Canadian parents (+$15.2 billion) and merger and acquisition transactions (+$12.2 billion) led the activity in the second quarter.
The trade and transportation sector accounted for one-third of the overall activity in the second quarter, leading direct investments abroad for the second consecutive quarter. On a geographical basis, more than half of all the investments were in the United States.
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Note to readers
Definitions
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 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 (+) or net borrowing (-) derived from the sum of the current and capital accounts corresponds to a net lending (+) or 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.
Foreign direct investment is presented on an asset-liability principle basis (that is, gross basis) in the financial account. Foreign direct investment can also be presented on a directional principle basis (that is, net basis), as shown in supplementary foreign direct investment tables 36-10-0025-01, 36-10-0026-01, 36-10-0473-01 and 36-10-0656-01. The difference between the two foreign direct investment conceptual presentations resides in the classification of reverse investment, such as (1) Canadian affiliates' claims on foreign parents and (2) Canadian parents' liabilities to foreign affiliates. Under the asset-liability presentation, (1) is classified as an asset and included in direct investment assets, also referred to as direct investment abroad in this text, and (2) is classified as a liability and included in direct investment liability, also referred to as direct investment in Canada in this text.
For more information on the balance of payments, consult, "Chapter 8. International Accounts," in the User Guide: Canadian System of Macroeconomic Accounts, available on Statistics Canada's website. The chapter also presents the most recent balance of payments statistics.
Real-time table
Real-time table 36-10-0042-01 will be updated on September 9. For more information, see Real-time data tables.
Next release
Balance of international payments data for the third quarter of 2024 will be released on November 28.
Products
The document, "Enterprise surveys and the measurement of digital trade in services in Canada," which is part of Latest Developments in the Canadian Economic Accounts (13-605-X), is available.
The product Canada's international trade and investment country fact sheet (71-607-X) is available online. This product provides easy and centralized access to Canada's international trade and investment statistics, on a country-by-country basis. It contains annual information for nearly 250 trading partners in summary form, including charts, tables and a short analysis that can also be exported in PDF format.
The product "Canada and the World Statistics Hub" (13-609-X) is available online. This product illustrates the nature and extent of Canada's economic and financial relationship with the world using interactive graphs and tables. This product provides easy access to information on trade, investment, employment and travel between Canada and a number of countries, including the United States, the United Kingdom, Mexico, China and Japan.
The Economic accounts statistics and International trade statistics portals are available from the Subjects module of the Statistics Canada website.
The product Methodology for Exports of Energy Products within the International Merchandise Trade Program, which is part of Latest Developments in the Canadian Economic Accounts (13-605-X), is available.
The Methodological Guide: Canadian System of Macroeconomic Accounts (13-607-X) is available.
The User Guide: Canadian System of Macroeconomic Accounts (13-606-G) is also available.
Contact information
For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; infostats@statcan.gc.ca) or Media Relations (statcan.mediahotline-ligneinfomedias.statcan@statcan.gc.ca).
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