- Canada’s merchandise trade deficit narrowed to $3.3 billion in November, down from $3.7 billion in October and slightly below consensus expectations for a $3.5 billion deficit. Nominal exports were up 0.5% (m/m), while nominal imports fell 0.3% on the month.
- The divide between exports and imports was even more apparent in volume terms. Export volumes increased 0.9%, whereas import volumes were down 0.7%.
- The increase in exports was limited to only four of the 11 product categories. Exports of metals and non-metallic mineral products (+11.6%) drove the headline increase. Statistics Canada attributed this to a surge in gold exports to the United Kingdom. Exports of metal ores and non-metallic minerals (+26%) were also solid. Providing some offset were lower exports of motor vehicles and parts (-4.1%) and forestry products and building and packaging materials (-6.2%).
- Imports fell in seven of the 11 product categories. This was largely driven by a sharp drop in imports of machinery and equipment (-3.9%). Imports of metal ores and non-metallic minerals (-11%), energy products (-7.8%), and electronics (-2.3%) were also weak in November.
- Canada’s merchandise trade surplus with the United States narrowed to $2.3 billion in November (from $3.1 billion in October). Its merchandise trade deficit with the rest of the world narrowed from $6.9 billion to $5.7 billion.
- Statistics Canada also released its monthly trade in services report for November. Services exports were up 1% on the month, whereas services imports fell 0.1%.
Key Implications
- November’s international trade report sends mixed signals. The increase in export volumes will be a net positive for growth, and is encouraging considering the virus-related headwinds seen since the beginning of the fall. However, the headline print masks a broad-based slowdown across 7 of the 11 export categories. The notable weakness in imports also bodes ill for domestic demand. The near-term backdrop for international trade continues to rest on shaky grounds. With restrictions ramped up since December in several Canadian provinces and other regions abroad, a few bumps along the way are expected.
- The deployment of vaccines globally suggests that there are better days ahead for international trade. As the vaccine rollouts accelerate in the upcoming quarters, downtrodden sectors like energy, travel, and transportation – which remain far detached from their pre-pandemic levels, should start to gradually see their fortunes reverse.
