The Conference Board of Canada’s Director of Economics, Matthew Stewart offers the following insights on the merchandise trade data for November:
Canada’s trade sector continued to underperform in November as a rail strike took a toll on both exports and imports. The poor performance of Canada’s trade sector over the last few months adds to other negative economic news including retail sales and employment. Canada’s economy will be hard pressed to achieve anywhere close to our already weak forecast of 1.4 per cent growth in the fourth quarter.
- Canadian merchandise exports declined 1.4 per cent in November as a rail strike at CN Railway took a toll on Canada’s exports. This comes on the heels of a 0.4 per cent decline in October.
- November’s contraction was largely the result of a large decline in exports of energy products. Exports of crude oil fell 12.5 per cent.
- Non-energy exports remained flat. This continues a trend of no growth outside of energy products since June of 2018.
- Merchandise imports also saw a substantial decline in November, falling 2.4 per cent.
- The deterioration in imports were largely owing to lower imports of other transportation equipment and parts and lower imports of energy products.
- With imports falling more than exports, Canada’s merchandise trade deficit narrowed from $1.6 billion in October to $1.1 billion in November.
- On a country by country basis, exports to the United States dropped by 3.3 per cent in November while imports fell 1.1 per cent. While some of this decline was the result of the rail strike, exports to the United States have been lackluster for some time.
- Exports to other countries performed better. Exports to countries other than the United States rose 4.3 per cent in November. Imports on the other hand, fell 4.7 per cent.
- With exports to the United States declining much faster than imports, Canada’s trade surplus with the United States fell from $5.1 billion in October to $4.2 billion in November. This is the smallest surplus since April 2019. This deterioration was offset by a smaller trade deficit with countries other than the United States which decreased from $6.7 billion in October to $5.3 billion in November.
- On a volume adjusted basis, real merchandise exports fell by a substantial 2.7 per cent in November while imports fell by a smaller 1.3 per cent. This means that merchandise trade subtracted from overall economic growth in November. This adds to other negative economic news released lately and suggests the economy slowed substantially in the final months of 2019.
- The story is little better in services trade. Exports increased by just 0.1 per cent in November while imports rose 1 per cent.
- While, we don’t yet have data for December, using available data, we estimate real exports fell 2.5 per cent in the fourth quarter largely the result of declines in energy and metal products. Meanwhile, we estimate imports fell by a smaller 0.9 per cent in the fourth quarter due to declines in imports of aircraft and other transportation equipment and parts.
- This projection is much weaker than that contained in our current economic outlook released in December and suggests Canada’s trade sector subtracted from growth in the final quarter of the year. When you add this to the other negative economic news released recently, it now looks like economic growth stalled in the final quarter of 2019—not a positive story as we head into a new year.
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