Quick take

Supply Disturbances Take a Toll on Trade

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  • Canada's merchandise trade surplus widened from $1.5 billion in August to $1.9 billion in September as imports declined more than exports. This was the fourth consecutive month the trade balance had improved.
  • Merchandise exports fell by 2.3 per cent in September. Motor vehicles and parts declined by 17.5 per cent and accounted for three-quarters of the monthly decline. Excluding motor vehicles and parts from the numbers, exports decreased 0.5 per cent. The monthly drop would have been larger had it not been for higher exports of energy products, which increased by 6.1 per cent.
  • Merchandise imports were also impacted by the supply chain shortages and contracted by 3.0 per cent. Declines were widespread, with lower imports of motor vehicles and parts (-13.6 per cent), energy products (-10.0 per cent) and metal and non-metallic mineral products (-6.3 per cent) accounting for most of the monthly drop.
  • In real terms, merchandise exports declined by 3.0 per cent while imports were down by 4.9 per cent, underscoring the adverse impact the supply issues are having on goods trade. Besides, real merchandise exports were lower in September than they were at the same time last year, indicating the trade sector has taken a couple of steps back in its recovery.
  • Exports to the United States contracted by 2.2 per cent in September, while imports decreased by 3.7 per cent. Accordingly, Canada’s trade surplus with the United States widened from $8.1 billion in August to $8.4 billion in September.
  • Trade of services moved in the opposite direction of goods, with exports recording a 2.7 per cent gain in September, while imports advanced by 5.6 per cent.

Key insights:

  • Despite the improvement in the goods trade balance, September’s merchandise trade numbers were largely disappointing, as the trade sector continues to grapple with supply disturbances. The spread of the Delta variant inflamed disruptions to supply chains and continued to take a major toll on some sectors, such as the motor vehicles and parts industry. Some automakers have been forced to curtail or shut production for an extended period to cope with the supply issues.
  • The outlook for Canada’s trade sector in the coming months will be mixed. On the one hand, market imbalances and other ongoing pandemic-related risks to global demand will continue to have a strong hold on Canada’s two-way merchandise trade in the months ahead. On the other hand, after being grounded throughout much of the pandemic, services trade is expected to see an uptick in activity as international travel restrictions are relaxed.
  • Despite the supply chain crisis unsettling trade flows, Canada’s trade sector will still manage to turn in a positive performance in the third quarter, with net trade positively contributing to real GDP growth.

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