Canada recorded an increase in its merchandise trade surplus ($2.1 billion) in October, up from a downwardly revised surplus of $1.4 billion (from $1.9 billion) in September. Merchandise exports (+6.4%) and imports (+5.3%) both increased significantly on the month. In volume terms, the picture was still solid, with both exports and imports up 2.8% and 7%, respectively.
The increase in exports was broad-based, spanning 8 of the 11 industries. Still, the headline increase was largely driven by the motor vehicles and parts (+30.8%) and energy products (+9.8%) industries. Exports of farm, fishing, and intermediate food products (+5.6%) and metal ores and non-metallic minerals (+8.4%) were also notably strong.
Imports were up in 7 of the 11 industries. Imports of motor vehicles and parts were up 27.2%, contributing the most to the headline increase. Imports of energy (+14.9%) and consumer goods (+4.5%) were also strong.
In a separate release, Statistics Canada revealed that services exports were up 2.2% in October, whereas services imports were up 0.4%. Travel services trade continued to rebound, with exports up 8.7% and imports up 9.5%. Similarly, transportation services exports were up 6%, with imports up 5.4%.
Key Implications
This was a solid report. On the exports side, growth was strong and broad-based across most industries. Meanwhile, the surge in imports is a signal of solid domestic demand, though partly skewed by monthly supply-related volatility in the motor vehicles and energy industries. Importantly, the release also points to a strong outturn for manufacturing output and sales in October. And finally, services exports continued to advance, albeit gradually, during the month.
Fundamentals for trade remain on a solid footing, aided by a continued global economic recovery, and importantly, strength in manufacturing sentiment south of the border. But, downside risks should not be ignored. In particular, the near-term trade outlook is susceptible to risks emanating from the devastating floods in B.C, which are impacting trade flows through the Port of Vancouver. Indeed, exports and imports could see a meaningful decline in the November data release.
