- Canada’s merchandise exports were down 1.9 per cent (month-over-month) in December. Meanwhile, imports edged by 0.2 per cent. As a result, Canada’s merchandise trade balance moved from a surplus of $1.1 billion in November to a deficit of $312 million in December—the first monthly trade deficit since July 2023.
- Exports fell to $64.1 billion, marking the second consecutive monthly decline. Exports of motor vehicles were down 8.2 per cent (on the back of lower exports of passenger cars and light trucks) and contributed most to the drop in exports in December. Exports of energy products, which fell by 3.1 per cent, also contributed to the decline. Overall, exports declined in 7 of 11 product sections in December.
- Imports rose to $64.4 billion for the month. Notable gains were recorded in imports of consumer goods (up 9.4 per cent), and metal and non-metallic mineral products (up 5.8 per cent). The increases in the aforementioned sections more than offset declines in several other product sections including electronic and electrical equipment and parts (-5.7 per cent), energy products (-9.9 per cent), and aircraft and other transportation equipment and parts (-11.7 per cent).
- Canadian exports to the U.S. were down 3.4 per cent—falling for a third consecutive month. Meanwhile, imports from the United States increased by 1.7 per cent. As a result, the merchandise trade surplus with the United States narrowed from $11.2 billion in November to $9.2 billion in December.
Insights
Weak economy will weigh on import growth this year. Merchandise imports are anticipated to face challenges stemming from a weaker Canadian dollar, which is currently valued at $0.74 USD, coupled with weak domestic demand. Interest rates remain elevated, and we expect them to remain that way until the middle of the year, which will weigh on the economy. Further, with weak consumer confidence, consumers are unlikely to splurge in the near-term.
A weaker global outlook will dampen the export landscape. The U.S. economy has been strong, which should provide some upside, but ultimately, we expect growth in the U.S. to slow through the year from what was seen over the last two quarters and as a result make the export landscape tougher. On the upside, Canadian exporters stand to gain from the depreciation of the Canadian dollar. Overall, the trade balance will likely not be a drag on GDP growth this year due to lower imports.
There are many external factors that could weigh on Canadian trade. The global economic outlook appears bleak, with the OECD estimating a moderation in global growth to 2.7 per cent this year, attributed to higher interest rates and sluggish global trade growth. Furthermore, geopolitical tensions and persisting conflicts in the Middle East and Ukraine add to the prevailing uncertainty. Weaker global demand and uncertainty could weigh down on Canadian merchandise exports this year.
For a more detailed analysis of our trade outlook, check out our latest Canadian Five-Year Outlook.
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