The Conference Board of Canada’s Senior Economist Doris Chu offers the following insights on the merchandise trade data for February:
Although merchandise exports increased in February, the outlook for Canada’s trade sector over the near term is far from positive. The combination of depressed global economic activity led by the U.S., and severe disruptions to global supply chains impacted by the intensification of the COVID-19 pandemic, leaves Canada in a very vulnerable position. With the worst yet to come, Canada’s trade sector can expect to take a major beating in the coming months.
- After declining in January, merchandise exports bounced back in February, rising by 0.5 per cent. The monthly increase was largely owing to higher shipments of aircraft and motor vehicles. Greater demand for private jets resulted in aircraft exports expanding by 46.8 per cent, while auto and parts exports rebounded with a 3.1 per cent gain following some temporary plant shutdowns in January. At the same time, energy exports were down 7.0 per cent, led by lower crude oil exports. Excluding aircraft, exports declined by 0.3 per cent.
- Merchandise imports declined by 0.8 per cent in February, dropping to its lowest level in two years. Lower imports were recorded for most industries, with energy products registering the largest decline. The monthly decline would have been bigger had it not been for a sizeable increase in aircraft imports.
- With exports increasing and imports falling, Canada’s merchandise trade deficit narrowed from $1.7 billion in January to $983 million in February.
- Exports to the United States were up 2.5 per cent in February due to higher shipments of aircraft and motor vehicles. At the same time, imports increased by 1.7 per cent led by higher imports of aircraft. Accordingly, Canada’s trade surplus with the United States increased from $3.4 billion in January to $3.7 billion in February.
- Canada’s trade deficit with the rest of the world shrank from $5.0 billion in January to $4.7 billion in February as exports fell by 5.3 per cent and imports were down by 5.6 per cent. Although COVID-19 did not have a significant impact on Canada’s total trade flows in February, trade with China—which was in the midst of its pandemic— continued to tumble. Exports to China were down 6.4 per cent due to lower demand for lobster and crab, while imports from China fell by 6.8 per cent, pulled down by lower imports of computers, cellphones and clothing.
- In terms of trade of services, exports dropped by 0.3 per cent in February, while imports declined by 0.5 per cent.
- Taken together, exports of goods and services were up 0.4 per cent in February, while total imports were down 0.8 per cent, bringing Canada trade deficit for goods and services to $2.7 billion in February.
- Net trade was a positive contributor to real GDP growth in February as merchandise export volumes increased by 2.7 per cent, while imports contracted by 1.7 per cent.
- Although exports were up in February, the month’s merchandise trade numbers were not reflective of how fragile Canada’s trade sector is. With the dust having barely settled from last year’s turmoil brought on by the China-U.S. trade war, Canada’s trade sector must now brace for the more powerful and destructive COVID-19 pandemic. With COVID-19 gaining traction outside of China in March, Canada’s trade sector will be in for a rough ride in the coming months.