Quebec: Trade Balance Improves In May

The Institut de la statistique du Québec reports that Quebec’s trade deficit narrowed $533 million in May to $1.42 billion (top chart). The value of exports rose $251 million (+4.8%) to $5.5 billion. Aerospace exports were up $313 million. Exports of ores were down $58 million and exports of chemicals were down $53 million. Increases were reported in 13 of 23 product groups accounting for 60% of exports. Imports fell $282 million (−3.9%) to $6.9 billion. The largest contribution to the decrease was from crude oil (−$105 million). However, the drop was very broad-based, with declines reported in 19 of 24 product groups accounting for 85% of imports. In constant dollars, the trade deficit narrowed $743 billion to $1.49 billion. Exports increased $351 million (+7.2%) to $5.2 billion while imports decreased $392 million (−5.5%) to $6.7 billion. Export prices fell 2.1% while import prices rose 1.7%.

OPINION: This morning’s report on Quebec international trade is positive in some respects. Aerospace exports rebounded as expected. However, Quebec’s other exports fell in May and the 7.2% real increase in total exports did not make up the 7.4% decline of April. Exports for the first five months of the year are nevertheless up 5.4% from the same period last year, almost matching the 5.8% gain of Canada as a whole. The large drag on Quebec economic growth from international trade in the first quarter is unlikely to recur in the second. Two months into Q2, the quarterly trade balance is on track to come in essentially flat (bottom chart). However, although Quebec international exports are forecast to grow 5% in 2012, a slowdown in domestic demand can be expected to hold GDP growth for the year to 1.4%. The May decline in imports is consistent with this trend. The sharpest since August 2009, it was concentrated in machinery and equipment imports, a leading indicator of business investment.