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Canada's balance of international payments, second quarter 2015

Released: 2015-08-31

Current account balance

-$17.4 billion

Second quarter 2015

Canada's current account deficit (on a seasonally adjusted basis) narrowed by $0.7 billion in the second quarter to $17.4 billion. The reduction in the deficit was mainly reflected in the trade in goods and services balance.

In the financial account (unadjusted for seasonal variation), transactions in the other investment category, mainly in the form of deposit liabilities, led the inflow of funds into the economy. Record Canadian direct investment abroad along with transactions in securities moderated the overall net inflow over the quarter.

Chart 1  Chart 1: Current account balances
Current account balances

Current account

Deficit on trade in goods narrows

The deficit on international transactions in goods was reduced by $0.3 billion in the second quarter, but remained high at $6.7 billion, close to its first quarter peak. The last month of the quarter posted strong export gains, which moderated the deficits recorded in April and May.

On a geographical basis, the quarterly trade surplus with the United States expanded by $2.5 billion, largely on stronger exports of crude petroleum. The trade deficit with all other countries widened by $2.2 billion to reach a record of $15.7 billion, despite a reduction in the trade deficit with China. The deterioration of the trade balance with European Union countries was the main contributor to the increase in the deficit with non-US countries.

Chart 2  Chart 2: Goods balances by geographic area
Goods balances by geographic area

Total exports of goods advanced $0.7 billion to $128.8 billion in the second quarter, largely on prices. Gains were mainly in the automotive sector and, to a lesser extent, the energy sector. Motor vehicles and parts were up $1.1 billion, led by higher export volumes of parts. Exports of passenger cars advanced $0.4 billion, as both volumes and prices rose. Exports of energy products increased $0.6 billion. Crude petroleum was up $2.1 billion on higher prices, recording its first increase since the second quarter of 2014. The gain was partially offset by lower exports of natural gas, mostly due to lower prices.

Other export categories generally dampened the growth in overall exports in the quarter. Metal and non-metallic minerals products fell $0.5 billion largely on lower volumes. Forestry products declined $0.3 billion on lower prices.

Total imports of goods were up $0.4 billion to $135.6 billion in the second quarter. Imports of motor vehicles and parts advanced $2.0 billion on record import volumes of passenger cars. Energy products and consumer goods also increased but at a slower pace. Crude petroleum was up $0.7 billion on higher prices, while consumer goods increased on higher volumes. Metal and non-metallic minerals, industrial machinery, and electronic and electrical equipment and parts recorded the largest declines in imports, all on lower volumes.

Trade in services deficit also narrows

The deficit on international trade in services narrowed $0.2 billion to $5.5 billion in the second quarter. The travel deficit was down $0.2 billion. Non-residents increased their spending in Canada as a higher number of foreign travellers entered the country during the quarter. On the payment side, Canadians reduced their spending in the United States, but this was offset by higher payments made overseas.

The surplus on commercial services widened $0.1 billion, largely reflecting lower payments in financial services during the second quarter. The transportation services deficit edged up $0.1 billion.

Lower deficit on investment income transactions

The investment income deficit was reduced by $0.2 billion to $4.0 billion in the second quarter. Income on both portfolio assets and liabilities went up during the quarter. Earnings by Canadian investors on their holdings of foreign securities advanced for the 11th consecutive quarter. Profits earned by foreign direct investors on their Canadian assets were down $0.2 billion, while those earned by Canadian direct investors on their assets abroad were largely unchanged.

Financial account

Canadian investment in foreign securities reaches an eight-year high

Canadian investors acquired $24.2 billion of foreign securities in the second quarter, the largest investment since the second quarter of 2007, just before the onset of the global credit crisis. Over three-quarters of these purchases were in non-US foreign instruments.

Chart 3  Chart 3: Canadian investment in foreign securities
Canadian investment in foreign securities

Canadian investment was led by equity, as investors added $13.2 billion worth to their portfolios in the second quarter, the largest such investment since the first quarter of 2001. This activity was mostly in non-US foreign shares. Canadian investment in foreign debt securities, mainly bonds, totalled $11.0 billion. A decline in Canadian holdings of US Treasury bonds dampened the overall investment in the quarter.

Foreign investment in Canadian securities slows

Foreign investors added $19.8 billion of Canadian securities to their holdings in the second quarter, about half the level of investment in the previous quarter. The bulk of the investment activity was in short-term debt instruments.

Foreign investment in the Canadian money market reached a record $19.6 billion, more than offsetting the divestment recorded in these instruments in the first quarter. Foreign acquisitions were mainly in private corporate paper and, to a lesser extent, provincial government paper. However, foreign investors' holdings of Canadian bonds were down $3.4 billion in the second quarter, marking a first divestment in two years. Retirements of US dollar-denominated provincial government bonds accounted for the bulk of this activity. Foreign acquisitions of federal government and federal government business enterprise bonds moderated this divestment activity.

Chart 4  Chart 4: Foreign investment in Canadian debt securities
Foreign investment in Canadian debt securities

At the same time, non-resident investors added $3.5 billion of Canadian equities to their holdings in the second quarter. Acquisitions on the secondary market were moderated by a decline in holdings due to cross-border merger and acquisition activities, as non-resident portfolio investors rendered Canadian shares to foreign direct investors in the second quarter. The Canadian stock market declined 2.3% in the second quarter.

Canadian short-term interest rates edged up in the quarter, while Canadian long-term interest rates increased 44 basis points, following a significant decline in the first quarter. The Canadian dollar gained 1.1 US cents in the second quarter.

Foreign direct investment increases significantly

Canadian direct investment abroad reached $36.9 billion in the second quarter, the largest such investment on record. Cross-border mergers and acquisitions accounted for $19.7 billion of the overall activity. On a sector basis, more than half of Canadian direct investment abroad in the quarter was in the manufacturing industry.

Chart 5  Chart 5: Canadian direct investment abroad
Canadian direct investment abroad

On the other side of the ledger, foreign direct investment in Canada totalled $20.4 billion in the second quarter, up from an $8.8 billion investment in the first quarter. About half of this investment was related to mergers and acquisitions. On a geographical basis, non-US foreign direct investors accounted for more than half of the overall activity.

Other investments lead the inflow of funds from abroad

In contrast to the direct and portfolio investment categories of the financial account, which posted net outflows of funds from the economy, the other investment category generated a net inflow of funds in the second quarter. This activity mainly reflected an increase in foreign currency deposits held by non-residents in Canada. A decrease in Canada's official international reserves also added to the overall inflows in the quarter.

  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 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.

For more information on 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.

Real-time CANSIM table

Real-time CANSIM table 376-8105 will be available on September 8. For more information, consult the document Real-time CANSIM tables.

Next release

Balance of international payments data for the third quarter will be released on November 30.

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 (613-808-2278;, International Accounts and Trade Division.

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