Quick take

Trade Balance Takes a Step Back Amidst Omicron Concerns

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  • Canada's total exports decreased 0.9 per cent while imports rose by 3.7 per cent in December to a record 57.7 billion. However, Canada's merchandise trade balance returned to a deficit position. It moved from a surplus of $2.5 billion in November to a deficit of $137 million in December.
  • In December, imports saw a significant increase, recording the third consecutive monthly increase. Imports of electronic and electrical equipment and parts posted the largest increase in December, rising 16.2 per cent to an all-time high of $7.0 billion. Meanwhile, imports of motor vehicles rose 5.1 per cent in December to $8.9 billion, their highest level since February 2020.
  • Exports were down in December after posting a record high in November, although increases were observed in most products. Exports of energy products fell 5.9 per cent in December, the first monthly decline since April. Crude oil exports (-5.0 per cent) contributed the most to the decrease, on a sharp decline in prices.
  • Despite supply chain disruptions, total export and import values reached records in 2021. Canada's annual merchandise exports rose 22.0 per cent compared with 2020. Annual exports reached a record $637 billion, exceeding the previous record set in 2019 by 7.0 per cent. While Imports reached a record $631 billion in 2021, up 12.2 per cent from 2020, but 2.7 per cent higher than in 2019.

Key insights:

  • Canada’s trade – both exports and imports – made a comeback last year, thanks to eased restrictions in most parts of the world. What’s more, despite the drop in exports in December, the previous quarter finished strong, with Canada's merchandise exports up 7.1 per cent compared to the previous quarter. The quarterly merchandise trade surplus widened from $2.1 billion in the third quarter to $4.1 billion in the fourth quarter.
  • But not all is well. The Omicron variant has added ambiguity to Canada's trade outlook. Restrictions at home and abroad will further prolong supply chain disruptions. And though container freight costs are lower than the highs experienced in September, they are still well above pre-pandemic levels. Still, robust commodity prices and a strengthening American manufacturing sector bode well for exports. We expect increased volatility in international trade in the first half of this year.

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Momanyi Mokaya

Momanyi Mokaya

Research Associate

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