Sat, Jan 16, 2021 @ 02:33 GMT
Home Contributors Fundamental Analysis Canadian Net Trade Posts Third Consecutive Monthly Surplus in January

Canadian Net Trade Posts Third Consecutive Monthly Surplus in January

  • The merchandise trade surplus was $0.8 billion in January, up from a revised $0.4 billion surplus (was $0.9 billion) in December
  • Exports rose 0.5% (despite a modest dip in energy exports). Imports dipped 0.3%, but entirely due to lower prices.

Although encouraging, the gain in exports in January was not particularly broadly based with declines in 6 of 11 subsectors. The nominal increase was led by higher exports of motor vehicles and parts (up 7.7%) and a 12.8% jump in farm, fishing and intermediate food products (boosted by a 38.4% jump in Canola exports.) The decline in imports was led by a 5.5% decline in metal and non-metallic mineral product purchases that Statistics Canada noted was largely a result of lower gold imports. Industrial machinery imports (an important indicator of domestic investment trends) declined 4.3% but that only partially retraced a 7.2% jump in December. Motor vehicle imports increased 3.6% to provide the main source of partial offset.

In volume terms, exports rose 0.8%, although with a somewhat stronger increase of close to 2% in non-energy exports. Import volumes rose 1.1% (significantly stronger than the 0.3% nominal decline) to leave, on balance, a less favourable report in terms of the real trade balance.

Our Take:

Non-energy export volumes rebounded 2% in January following a similar-sized drop in December. The measure was still down about 2% from a year ago (albeit with much of that year-over-year decline due to an ultimately temporary surge in non-energy export volumes from November through January of last year). The data is volatile and today’s report does not change our view that underlying export volumes remain on a modestly positive upward path. Perhaps more encouraging is that imports of machinery, on balance, are still up significantly over December and January (January industrial machinery imports are 12%, at an annualized rate, above their Q4 average), potentially pointing to stronger M&E investment early in 2017. In terms of near-term GDP implications, the deterioration in the volume trade balance in January (led by higher import volumes) remains consistent with our expectation that net trade will subtract about a percentage point from growth in Q1/17 after adding an average 3.2 percentage points per quarter over the second half of 2016. That remains consistent with our call for GDP growth to slow to a (still above-trend) 1.9% rate in Q1 after a solid, and stronger-than-expected, 2.6% Q4/16 gain.

RBC Financial Group
The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.

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