By Promit Mukherjee

OTTAWA (Reuters) – Canada posted a larger-than-expected trade deficit of $1.26 billion ($908 million) in September as a larger drop in imports failed to offset a drop in exports , the data showed on Tuesday.

The September data was the seventh straight monthly trade deficit, driven mainly by lower exports to major trading countries other than its largest trading partner, the U.S., Statistics Canada said.

Due to an ongoing digital transition at the Canada Border Services Agency’s revenue assessment and management, where Statscan obtains most of its trade data, the results for September include a greater use of estimates.

Analysts polled by Reuters had predicted a deficit of $800 million, and Statscan sharply revised August’s trade deficit to $1.47 billion from $1.1 billion.

The biggest impact on exports, which fell 0.1 percent, came from a 5.4 percent drop in shipments of metals and non-metallic minerals, led by a 15.4 percent drop in the unwrought gold category.

Lower prices for metals and energy products were behind the monthly drop in exports, with total commodity export prices falling 1.5 percent, Statscan said, adding that in volume terms exports rose 1.4 percent.

Inbound shipments fell 0.4 percent in September but were largely unchanged in volume terms. Imports of metallic and non-metallic mineral products fell by 12.7% and contributed the most to the overall decline.

The decline in imports largely reflects Canada’s weak demand environment, which has been hit by the impact of high interest rates, which were held at 23 years of 5% for over a year before the Bank of Canada began to cut it from June.

Since then, the BoC has cut its key policy rate at four consecutive meetings to 3.75%.

The BoC will announce its next monetary policy decision on December 11, with more than 45% betting in favor of another 50 basis point cut.

Total exports were $63.88 billion, while imports were $65.14 billion.

Canada’s trade surplus with the U.S., which accounts for more than three-quarters of its total exports, rose to $8.29 billion in September from $7.82 billion a month ago. US imports, which account for 60% of all Canadian imports, rose 0.8% month-on-month.

($1 = 1.3882 Canadian dollars)

(Reporting by Promit Mukherjee in Ottawa; Editing by Dale Smith)