Is international confidence in the Canadian economy sliding?
Foreign direct investment in Canada is now at its lowest level since last year, new data from Statistics Canada showed on Thursday, as Canadian investment in foreign securities climbed.
Total foreign direct investment hit the $80.3 billion mark in the third quarter, the national statistics agency said, while Canada's investment in foreign securities jumped to $57.6 billion during the same period. That activity resulted in a net portfolio investment inflow of $22.7 billion.
Direct investment declines
Foreign direct investment (FDI) into Canada slipped to $18.1 bn in the third quarter, primarily directed toward the trade and transportation, finance and insurance, and manufacturing sectors. Domestic companies’ direct investment abroad declined to $25.1 billion in Q3.
The country remained in a net FDI outflow position, though the deficit narrowed slightly.
Current account shows improvement
Canada’s current account deficit narrowed to $9.7 billion in Q3, down from a record shortfall of $21.6 billion in the second quarter. The third-quarter figure represents approximately 1.2% of GDP and aligns roughly with the average over the past year.
The improvement stemmed from a narrower deficit in goods trade as tariff uncertainty eased from its second-quarter peak. Exports increased, driven by energy and consumer goods. However, the estimated $11.1 billion goods trade shortfall remains the second largest in history, dating back to 1981.
Services and income accounts
The services trade account improved to a $0.5 billion surplus from a $0.7 billion deficit in Q2, largely due to a bigger surplus in commercial services. The travel services surplus remained relatively unchanged as Canadians spent less money abroad while international travellers, including students, spent less money in Canada.
The primary income surplus rose to $3.2 billion, supported by a record-high $7.0 billion surplus in investment income. The secondary income deficit narrowed from $2.6 billion to $2.3 billion in Q3.
Labour market
A separate payrolls survey revealed a net loss of 60,000 jobs in September, contrasting with household employment increasing by the same magnitude. The job vacancy rate edged up to 2.7% as openings increased for the first time since January.
Officials noted that September estimates for goods and services would be subject to larger-than-normal revisions in the absence of US trade data, which is expected to be released in the coming weeks.
The current account improvement follows a difficult second quarter, though trade uncertainty remains elevated as Canada-US negotiations remain on hold.
