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Canadian Merchandise Trade Surplus Narrows in January

ByThe National Bank of Canada
Published 03/12/2012, 02:01 AM
Updated 05/14/2017, 06:45 AM
FACTS

: Canada’s merchandise trade surplus narrowed to C$2.1 bn in January (from C$2.9 bn in prior month) in line with consensus expectations (top chart). In January, exports fell 2.3% with broad-based declined, including the 11.9% drop for both machinery/equipment and industrial goods/materials which more than offset the 6.1%
increase in auto exports. Imports fell 0.6%, as gains in autos (+7%) were more than offset by declines in other categories including the 1.7% drop in machinery and equipment.

That said, Canada is benefiting from the US economic ascent as reflected by the over C$6 bn surplus with our southern neighbour (middle chart). That’s the highest goods trade surplus with the US since October 2008. The overall drop in exports were less severe in real terms. Export volumes fell just 0.2% in January, not too bad considering that this comes after a 5.9% increase in the prior month. Real imports rose just 0.9%.

OPINION: The small drop in exports and the trade surplus has to be looked at in context. Those come after very strong December results. The good handoff from December puts Q1 in a good position, with trade set to be a contributor to GDP. Real exports are now tracking +17.3% annualized in Q1 while import volumes are tracking just +0.5%.The drop in imports of machinery and equipment is a bit concerning though. That item is now tracking -2.7% annualized in Q1 (bottom chart), not a good sign for business investment in the quarter.

Canada Merchandise trade surplus falls in January
Goods trade surplus with the US hits C$6 billion
Sluggish machinery imports suggest Q1 softness in business investment spending

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