The Conference Board of Canada’s Senior Economist Doris Chu offers the following insights on the merchandise trade data for December:
December’s merchandise trade numbers were encouraging, as Canada’s trade sector ended 2019 on a positive note with both exports and imports registering increases. Looking ahead, although the turbulence on the global front has eased somewhat recently, slower global economic growth and lingering uncertainty suggests Canada’s trade sector will continue to face some challenges over the next few quarters that will prevent net-exports from making a significant contribution to overall economic growth in the near term.
- Canada’s trade sector closed 2019 on an upbeat note with merchandise exports increasing by 1.9 per cent in December. Higher energy exports accounted for much of the monthly increase as crude oil exports bounced back sharply in December following a resolution with a problem at the Keystone pipeline in North Dakota. On the other hand, non-energy exporters continued to struggle as exports excluding energy was up by a tepid 0.3 per cent
- Merchandise imports also increased in December, but by a mere 0.2 per cent. Higher imports of consumer products and aircraft and other transportation equipment were largely offset by lower imports of metal ores and non-metallic minerals.
- With exports outpacing imports by a wide margin, Canada’s merchandise trade deficit shrank from $1.2 billion in November to $370 million in December.
- Fueled by higher shipments of crude oil, exports to the United States were up 2.9 per cent in December, while imports declined by 0.2 per cent. As a result, Canada’s trade surplus with the United States climbed from $4.1 billion in November to $5.2 billion in December.
- On the other hand, Canada’s trade deficit with the rest of the world widened from $5.3 billion in November to $5.6 billion in December, as imports outpaced exports by a sizeable margin. A 0.9 per cent decline in exports to countries other than the United States was largely owing to lower exports of gold to the United Kingdom. Meanwhile, imports from countries other than the United States was due to higher imports of other transportation equipment from Belgium and miscellaneous products from China.
- The trade story for services was similar to the merchandise side with exports outperforming imports. Exports increased by 0.6 per cent in December while imports declined 0.7 per cent.
- For the year, the trade deficit totalled $18.3 billion in 2019 — the smallest deficit since the last annual surplus was recorded in 2014.
- Real exports fell 2.0 per cent in the fourth quarter, pulled down by lower exports of motor vehicles and parts, and other crop products. This marked the second consecutive quarter that export volumes have fallen. At the same time, imports contracted by 1.8 per cent due to declines in imports of motor vehicles and parts and industrial machinery and equipment.
- Although today’s trade report was encouraging, the near-term outlook for Canada’s trade sector remains less-than-stellar. Softer global demand, combined with ongoing challenges in the non-energy sector, are expected to continue to weigh on growth prospects for merchandise exports over the next few quarters.