| Consensus | Actual | Previous | Revised | |
|---|---|---|---|---|
| Balance | C$-0.2B | C$0.972B | C$0.42B | C$-0.487B |
| Imports - M/M | -2.9% | -1.3% | -1.2% | |
| Exports - M/M | -0.7% | -2.4% | -3.8% |
Highlights
Amid contracting trade activity, Canada's merchandise trade balance unexpectedly swung into a surplus of C$972 million in March from a deficit of C$487 million in February, while forecasters in an Econoday survey had anticipated a C$200 million gap.
Both exports and imports deteriorated over the month, with the former down 0.7 percent while imports fell a much steeper 2.9 percent. By contrast, in February, a 3.8 percent export contraction outweighed a 1.2 percent import decrease.
In the first quarter, exports fell 0.3 percent, mainly due to lower prices, and imports were down 0.2 percent.
On the import front, 8 of 11 categories declined in March, driving imports to their lowest level in a year due to weaker activity, as volumes contracted 5.3 percent. Consumer goods fell 11.0 percent, led by a 31.8 percent plunge in pharmaceutical products after large import shipments in February (unrelated to Covid). Excluding pharmaceutical products, consumer goods imports were down 5.1 percent, led by footwear and accessories, and miscellaneous goods and supplies. On the upside, industrial machinery, equipment and parts rose 5.9 percent, metal and non-metallic mineral products 6.1 percent and energy 4.4 percent.
Looking at sales abroad, 7 of 11 categories decreased on the month, driving exports to their lowest level since February 2022. Lower crude oil exports weighed on energy, which was down 5.9 percent on the month, marking the ninth consecutive monthly decline. Adjusting for price effects, overall exports edged up 0.1 percent.
A 30.8 percent surge in exports of aircraft and other transportation equipment and parts helped offset declines in seven categories. The surge was largely explained by exports of business jets to the US in March. Still, overall exports to the US fell 1.5 percent in March, while imports from the US edged down 0.1 percent, bringing down the trade surplus with the US to C$7.6 billion from C$8.3 billion in February.
The Bank of Canada is keeping a close eye on developments in the global financial system. While the base case is continued stability, it said in its minutes from the April 12 meeting that higher bank funding costs resulting in tighter credit conditions would dampen global economic growth.
Both exports and imports deteriorated over the month, with the former down 0.7 percent while imports fell a much steeper 2.9 percent. By contrast, in February, a 3.8 percent export contraction outweighed a 1.2 percent import decrease.
In the first quarter, exports fell 0.3 percent, mainly due to lower prices, and imports were down 0.2 percent.
On the import front, 8 of 11 categories declined in March, driving imports to their lowest level in a year due to weaker activity, as volumes contracted 5.3 percent. Consumer goods fell 11.0 percent, led by a 31.8 percent plunge in pharmaceutical products after large import shipments in February (unrelated to Covid). Excluding pharmaceutical products, consumer goods imports were down 5.1 percent, led by footwear and accessories, and miscellaneous goods and supplies. On the upside, industrial machinery, equipment and parts rose 5.9 percent, metal and non-metallic mineral products 6.1 percent and energy 4.4 percent.
Looking at sales abroad, 7 of 11 categories decreased on the month, driving exports to their lowest level since February 2022. Lower crude oil exports weighed on energy, which was down 5.9 percent on the month, marking the ninth consecutive monthly decline. Adjusting for price effects, overall exports edged up 0.1 percent.
A 30.8 percent surge in exports of aircraft and other transportation equipment and parts helped offset declines in seven categories. The surge was largely explained by exports of business jets to the US in March. Still, overall exports to the US fell 1.5 percent in March, while imports from the US edged down 0.1 percent, bringing down the trade surplus with the US to C$7.6 billion from C$8.3 billion in February.
The Bank of Canada is keeping a close eye on developments in the global financial system. While the base case is continued stability, it said in its minutes from the April 12 meeting that higher bank funding costs resulting in tighter credit conditions would dampen global economic growth.
Market Consensus Before Announcement
March's trade balance is seen in deficit of C$0.2 versus an as-expected February surplus of C$0.4 billion.
Definition
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.
Description
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.
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.
