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Canadian Trade Deficit Increases Slightly In May

ByThe National Bank of Canada
Published 07/12/2012, 05:36 AM
Updated 05/14/2017, 06:45 AM
Facts:

Canada’s merchandise trade deficit edged up from $623 million to $793 million in May as imports grew 0.4% and exports were flat. Exports rose $187 million (+0.5%) to $37.9B. Higher exports of machinery & equipment (+$583 million or +8.7%) almost offset a $417 million drop (-4.3%) in energy exports and smaller declines in most other categories. Imports rose $155 million (+0.4%) with a $153 million increase (+3.7%) in energy products, changes in other categories canceling each other. Export prices and import prices both rose 0.6%. In volume terms, exports declined 0.6% while imports were down 0.2%. Therefore, in real terms, the trade deficit edged up from $8.2B to $8.4B.
Trade deficit slightly expands in May
Opinion: The drop in volume exports in May is disappointing, although it reflects the global economic soft patch. So far in Q2, volume exports are down 1.6% annualized from Q1, after three quarterly rises. Since volume imports are up 1.4%, trade seems to be a drag on real GDP growth in Q2 (middle chart). The global soft is also causing a drop in energy and industrial goods prices, which means deterioration in terms of trade for Canada since February (bottom chart). Volume exports in machinery and equipment increased substantially in May, but this was due to the volatile category of aerospace products and parts. Furthermore, import volumes of machinery and equipment, an indicator of business investment, fell in May. So far, they exceed Q1’s pace by a tiny annualized 0.6%. Looking ahead, we still expect an improvement in volume exports in the second half of 2012 as the U.S. economic expansion gets firmer.
Trade a drag on growth so far in Q2
Terms of trade

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