HomeContributorsFundamental AnalysisCanada's Merchandise Trade Balance Widens Further in October  

Canada’s Merchandise Trade Balance Widens Further in October  

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.

TD Bank Financial Group
TD Bank Financial Grouphttp://www.td.com/economics/
The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.

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