Merchandise Exports Plummet in January

By: Doris Chu

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The Conference Board of Canada’s Senior Economist Doris Chu offers the following insights on the merchandise trade data for January:

After ending 2019 on a positive note, exports plunged in January. Looking ahead, hopes of a better trade performance in 2020 were quickly dashed given the recent turn of events. On top of slower U.S GDP growth, the impact of coronavirus (COVID-19) on the world economy and global supply chains will certainly have a hand in dampening trade flows further in the coming months. Consequently, growth prospects in Canada’s trade sector will be limited over the near term.

  • Canada’s merchandise trade sector started 2020 off on a solemn note as exports were down by 2.0 per cent in January. The monthly contraction was widespread, with notable declines recorded for motor vehicles and energy products. Temporary plant shutdowns and the closure of Oshawa’s GM plant were responsible for the lower exports of motor vehicles, while milder weather in the United States resulted in lower exports of natural gas.
  • Merchandise imports also fell in January, but by a lesser 0.5 per cent. The decline in imports was largely owing to lower imports of pharmaceutical products, which more than offset solid import gains of energy products and metal ores and non-metallic minerals.
  • With exports falling by more than imports, Canada’s merchandise trade deficit more than doubled December’s $732 million level in January, increasing to $1.5 billion.
  • Exports to the United States were down 1.7 per cent in January due to lower shipments of motor vehicles. At the same time, imports increased by 1.6 per cent. Consequently, Canada’s trade surplus with the United States shrank from $4.7 billion in December to $3.6 billion in January — the smallest surplus since February 2019.
  • Meanwhile, Canada’s trade deficit with the rest of the world narrowed from $5.4 billion in December to $5.0 billion in January as exports declined by 2.8 per cent and imports contracted by a greater 4.1 per cent.
  • On the other hand, trade in services saw imports falter more than exports. Exports dropped by 1.1 per cent in January while imports were down 2.4 per cent.
  • Taken together, exports of goods and services declined by 1.8 per cent in January where while total imports were down 0.9 per cent, bringing Canada trade deficit for goods and services to $3.1 billion in January.
  • In real terms, merchandise exports declined by 3.1 per cent while imports were down 0.5 per cent, highlighting the continued struggles in the merchandise trade sector.
  • The weak export performance in January sets the stage for slower growth for the year. On top of slower U.S. GDP growth, disruptions to global supply chains impacted by coronavirus (COVID-19) will weigh heavily on trade activity in Canada in the near term.