Canada's current account deficit widened to the second largest gap on record in the third quarter, at $18.9 billion, Statistics Canada says.

The current account deficit measures how much Canada owes the rest of the world after adding up the total value all transactions – both exports and imports β€” in goods, services and investment income flows.

The deficit increased by $500 million on a seasonally adjusted basis, amid declining exports of oil and other goods.

The agency says total exports of goods were down $3.7 billion to $112.7 billion, marking a third consecutive quarterly drop.

Exports of energy products were down $1.6 billion, on lower volumes of crude petroleum and refined petroleum products and there were also drops in exports of consumer goods and industrial chemical products.

High dollar continuing challenge

Imports declined $2.5 billion in the third quarter, following a high set in the previous quarter. Motor vehicles and parts imports fell $700 million and energy products declined $500 million.

The overall balance on trade in goods posted a $4.8 billion deficit in the third quarter, following a $3.6 billion deficit in the previous quarter.

Canadian direct investment abroad rose to $19.1 billion, driven by an increase in mergers and acquisitions. That compared with $2.1 billion in the previous quarter.

The wider deficit was no surprise, TD Economist Leslie Preston said in a report, given that "we had already seen a very weak quarter for goods trade, and tomorrow's GDP report is likely to show the impact of that in a mediocre 0.7 per cent growth tally."

"Canadian exporters continue to face the challenge of a high Canadian dollar on top of a softer global growth backdrop," Preston said.

The picture should improve in the second half of next year, she said, as the U.S. economy gains momentum, lifting demand for Canadian exports.

With files from The Canadian Press