CA: Merchandise Trade

Thu May 04 07:30:00 CDT 2017

Consensus Actual Previous Revised
Level C$-1.1B C$-0.1B C$-1.0B C$-1.0B
Imports-M/M 1.7% 0.6% 0.1%
Imports-Y/Y 5.6% 1.4% 1.3%
Exports-M/M 3.8% -2.4% -2.5%
Exports-Y/Y 12.9% 4.4% 4.2%

March merchandise trade deficit narrowed to a better than expected C$135 million from February's C$1.1 billion. Exports rose 3.8 percent to a record high C$47.0 billion, due to stronger exports of energy products and consumer goods. Imports were up 1.7 percent to C$47.1 billion, mainly on higher imports of unwrought gold. On the year, imports were up 5.6 percent and exports were 12.9 percent higher.

The rebound in exports from February's decline was due to increases in 8 of 11 sections. Volumes were up 2.5 percent in March and prices increased 1.3 percent. Energy products, consumer goods, and metal and non-metallic mineral products were responsible for the increase in exports in March. Exports excluding energy products rose 3.1 percent.

Exports of energy products were up 7.0 percent to C$8.7 billion in March on higher volumes. Natural gas exports led the increase, which is attributable to unusually low temperatures in the northeastern United States in March. Exports of consumer goods also contributed to the overall increase in March. Metal and non-metallic mineral products were up 7.1 percent to C$5.6 billion in March, following a 7.4 percent increase in February.

Total imports were up for the fourth consecutive month to C$47.1 billion in March, with gains in 7 of 11 sections. Prices rose 1.9 percent while volumes edged down 0.2 percent. Higher imports of metal and non-metallic mineral products, industrial machinery, equipment and parts, and motor vehicles and parts were the main contributors to the increase.

In March, exports to countries other than the United States rose 15.3 percent to a record high C$12.6 billion. Higher exports to China (gold and coal), India (legumes) and South Korea (coal and copper) were responsible for the gain in March. Imports from countries other than the United States were up 1.2 percent to C$16.7 billion in March, on higher imports from Saudi Arabia (crude oil) and the United Kingdom. As a result, the trade deficit with countries other than the United States narrowed from C$5.6 billion in February to C$4.1 billion in March.

Imports from the United States increased 2.0 percent to C$30.4 billion in March, while exports to the United States edged up 0.1 percent to C$34.4 billion. As a result, Canada's trade surplus with the United States narrowed from C$4.5 billion in February to C$4.0 billion in March.

Over the first quarter, the nominal trade balance still posted a deficit of C$1.1 billion after a virtually nil balance in the fourth quarter. In real terms, however, Canada's trade balance continued to post a surplus, although it narrowed to C$1.2 billion in the first quarter from C$5.6 billion in the fourth quarter.

The merchandise trade balance measures the difference between imports and exports of goods. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade and can offer a guide to an economy's competitiveness. Nominal data are supplied with regards to principal trading partners and product classification.

Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect currency values in foreign exchange markets. This is particularly true for Canada which relies on exports and particularly those to the U.S. for growth. It should be noted that this report focuses solely on goods trade - it leaves services trade for the quarterly national accounts and balance of payments reports.

Imports indicate demand for foreign goods while exports show the demand for Canadian goods in the U.S. and elsewhere. The Canadian dollar is particularly sensitive to changes in its trade balance with the U.S. For the most part, Canada's trade balance is in surplus thanks to its exports to the U.S. Both the nominal export and import values are split into volume (real) and price components. This permits trade data to be analyzed for both changes in trade patterns as well as changing prices. This has been particularly important of late given energy price volatility and the impact on Canada's merchandise shipments. A word of caution -- the data are subject to large monthly revisions. Therefore, it can be misleading to form opinions on the basis of one month's data.

The bond market is sensitive to the risk of importing inflation. This report gives a breakdown of trade with major countries so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country.