Canada recorded its largest-ever current account deficit in the second quarter as exports slumped and investors shifted money abroad.
The deficit widened to $21.2 billion between April and June, nearly $20 billion more than the previous quarter, as merchandise exports dropped 13.1 per cent to $182.2 billion. Imports also declined by four per cent to $201.8 billion, but the sharper fall in exports left Canada with a record $19.6-billion goods trade gap.
Energy products, motor vehicles and consumer goods led the downturn, pushing exports to their lowest level since late 2021. The goods surplus with the United States narrowed to $10.1 billion from $31.3 billion, while the deficit with other trading partners edged down to $29.6 billion.
Services trade was steadier, with exports slipping 1.2 per cent and imports falling 1.9 per cent to produce a modest $100-million surplus. A wider transportation deficit and a smaller travel surplus were more than offset by growth in commercial services, where rising sales of computer, maintenance and financial services lifted the balance to $1.4 billion.
Financial markets added to the pressure. Foreign investors sold $16.8 billion in Canadian securities, the largest divestment since 2007, while Canadian investors purchased $26.8 billion in foreign assets, mostly U.S. equities and debt. Together, they created a $43.7-billion net outflow of portfolio capital, bringing the total for the first half of the year to almost $86 billion.
Direct investment flows provided some balance but could not offset the broader picture. Canadian firms increased their investment abroad to $26.8 billion, targeting finance, insurance and management companies, with about half directed to the United States. Foreign direct investment in Canada slowed to $18.5 billion from $30.2 billion in the first quarter, led by activity in management and manufacturing sectors.
The weaker exports and significant capital outflows pushed Canada’s current account to its deepest deficit on record and left the country more dependent on financial inflows to cover its international obligations.