December 6, 2016 / 1:42 PM / 8 months ago

UPDATE 2-Canadian trade deficit shrinks as one-off factors hit imports

3 Min Read

(Adds reaction, details, Canadian dollar edging up)

By David Ljunggren

OTTAWA, Dec 6 (Reuters) - Canada's trade deficit in October shrank to C$1.13 billion ($0.85 billion) from a record C$4.38 billion in September as one-off factors helped slash the value of imports, Statistics Canada data indicated on Tuesday.

The deficit - the 26th in a row - was smaller than the C$2.00 billion shortfall forecast by analysts in a Reuters poll.

The long-suffering export sector - which the Bank of Canada says is a cause for concern - turned in a sluggish performance despite a low Canadian dollar and a strengthening U.S. economy.

Imports fell by 6.3 percent to C$44.71 billion, the lowest level since February 2015. Imports of industrial machinery sank by 42.0 percent from September, when a South Korean module destined for an offshore oil rig arrived in Canada.

Imports of energy products dropped by 11.6 percent in October, which coincided with scheduled maintenance at refineries in eastern Canada.

Exports edged up 0.5 percent to C$43.58 billion, despite declines in seven of the 11 main sections, while volumes dipped by 0.7 percent.

The Bank of Canada said last month that structural export capacity and competitiveness challenges had been more persistent and pronounced than the bank expected.

The sector showed signs of strength in the third quarter as the economy bounced back from a devastating Alberta wildfire in May but now looks to be in slow gear again.

"That plays to the concern that the third quarter export surge was transitory and ... we are back in terms of renewed export frustrations," said Derek Holt, vice president and head of capital markets economics at Scotiabank.

The Canadian dollar strengthened slightly, edging up to C$1,3265 to the U.S. dollar, or 75.39 U.S. cents, up from C$ 1.3278, or 75.31 U.S. cents before the release.

Energy exports increased by 5.5 percent, helping offset lower shipments of consumer goods and aircraft and other transportation equipment.

Exports to the United States, which accounted for 75.2 percent of all Canadian exports in October, grew by 1.6 percent while imports slipped by 0.1 percent. As a result, Canada's trade surplus with the United States grew to C$3.02 billion from C$2.47 billion in September.

"It's a mixed bag. I think there are good news stories inside what is a tepid number," said Peter Hall, chief economist at Export Development Canada, pointing to increased exports of autos and forestry products.

($1=$1.33 Canadian)

With additional reporting by Fergal Smith in Toronto; Editing by Frances Kerry and Bill Trott

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