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Canadian Trade Balance Improved In October

ByThe National Bank of Canada
Published 12/12/2012, 06:48 AM
Updated 05/14/2017, 06:45 AM
FACTS:

Canada’s merchandise trade deficit narrowed to CAD 0.17 bn in October from a revised CAD 1.0 bn deficit in September (top chart). In October, exports were up $374M (+1.0%) as farm, fishing and intermediate food products (+$429M, mostly soybeans and canola) reached a record high.

Crude oil (+$287M) and metal and non-metallic mineral products (+$221M, mostly aluminium and nickel) were the other main contributors. Imports were down $471M (-1.2%), mostly due to chemical, rubber and plastic products (-$275M) and metal and non-metallic mineral products (-$209M).

The trade surplus with the U.S. declined $434M (exports -$55M, imports: +$379M), but the trade deficit with the rest of the World narrowed $1.3 bn (exports: +429M, imports: -$850M). In volume terms, exports were almost flat, while imports fell $773M (-2.1%). Export prices rose 1% while import prices were up 0.9%.
Trade deficit narrowed in October
Volume imports of machinery & equipment
Merchandise trade balance in constant dollars
OPINION: Even if October’s trade report came in better than expected (consensus was expecting an increase in the trade deficit), it is not as good as the headline suggests, as volume exports were flat. Also, volume imports of machinery and equipment were down (middle chart), suggesting that the lethargy in business investment in machinery and equipment seen in Q3 extended to early Q4.

As such, the fact that overall volume imports were markedly down in October means that after one month, trade is contributing to economic growth in Q4 (bottom chart). But keep in mind that this could reflect a slowdown in domestic demand or a drawdown on inventories, or both, in which case economic growth will not improve overall. We continue to forecast an economic expansion of about 1% annualized for Canada in Q4.

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