03/06/2015 12:33 EST | Updated 05/06/2015 05:59 EDT

Canada's trade gap widens to $2.5B on oil price slide

The decline of oil prices is eating into Canada’s hopes for improving exports, as the value of crude oil and bitumen exports declined by a whopping 23 per cent in the past year.

In January, Canada’s trade gap widened to $2.5 billion — the largest deficit since July 2012, Statistics Canada reported on Friday.  

Overall, exports were down 2.8 per cent from a year earlier to $42.6 billion, while imports were virtually unchanged at $45.1 billion.

The hit mainly came from a drop in energy products, which were down 14 per cent from the previous year, but there also was an eight per cent drop in metal and mineral exports.

Crude oil and crude bitumen exports declined 23 per cent to $4.4 billion, while oil prices over the same period fell 23.2 per cent.

Economists and the Bank of Canada had hoped the lower Canadian dollar and lower energy prices would give a boost to the manufacturing sector and to exports.

But that benefit has been slow to materialize and hasn’t offset the impact of lower oil prices.

Auto sector exports more

The auto sector and manufacturers of industrial machinery and electrical equipment were bright spots in the dim trade outlook.

Non-commodity exports were up by 1.4 per cent in January, led by a rise in exports of vehicles and auto parts.

TD economist Brian DePratto predicts a slowing of the Canadian economy over the remainder of the year consistent with the poor trade numbers.

“The January trade data continues the trend of weak headline export numbers, as the effect of the drop in energy prices continues to be felt in the data,” he wrote in a note to investors.

“While there was resilience in some export categories, the continuing fall in the ratio of export prices to import prices will weigh on Canadian incomes and nominal growth in the coming quarters.”

Statistics Canada said imports from the United States were down 0.1 per cent to $30.5 billion in January, while exports fell 3.1 per cent to $31.8 billion, narrowing Canada's trade surplus with that country to $1.2 billion in January from $2.2 billion in December. The high U.S. dollar is discouraging Canadians from buying more U.S. goods.

Exports to other countries were down 1.9 per cent to $10.9 billion in January, while imports were up 0.2 per cent to $14.5 billion, widening the trade deficit with the rest of the world to $3.7 billion in January from $3.4 billion in December.