Trade Balance Slips Lower

Canadian Economics

By: Momanyi Mokaya  

  • Canada’s merchandise exports decreased by 2.3 per cent (month-on-month) in November, while imports fell by 2.1 per cent. Consequently, Canada’s merchandise trade surplus with the world went from a surplus of $130 million in October to a deficit of $41 million in November.
  • Total exports decreased by 2.3 per cent to $64.4 billion. Exports of consumer goods declined by 6.3 per cent in November, with general declines across the product section. Exports of energy products decreased by 4.7 per cent, a fifth consecutive decline.
  • Total imports decreased by 2.1 per cent to $ 64.4 billion. After a 1.8 per cent decline in October, imports of consumer goods were down 5.7 per cent in November. Similar to last month, imports of medicinal and pharmaceutical products decreased the most (-11.5 per cent). Imports of metal and non-metallic mineral products fell by 7.9 per cent in November after rising by 7.0 per cent in October.
  • Exports to the United States declined 2.6 per cent while imports trimmed down 0.1 per cent. Therefore, the merchandise trade surplus with the United States narrowed for a sixth consecutive month, moving from $8.6 billion in October to $7.3 billion in November.

Key Insights

As we start the new year, the market is watching for a further reaction from Russia to sanctions on its energy exports. An export ban on the OPEC+ producer’s refined products will start early this year (2023), resulting in less crude making it to buyers and comes at a time when the world’s demand for energy products is likely to increase due to changes in COVID-19 policy in China. Regarding Canada’s trade balance, this should help tick Canada’s trade balance higher in the coming months. While on the other hand, this decision and policy shift could likely generate another blow to the global economy, which is already battling energy-driven inflation.

According to the Global Supply Chain Pressure Index (GSCPI), pressures in the supply chain decreased in November. This compounds the easing observed over the past four months showing positive results for the future of trade. Furthermore, freight rates fell 21 per cent in November, its lowest level since December 2020, as demand continued to slow and congestion levels decreased. This rate is 72 per cent lower than a year ago, though still double its 2019 level. Therefore, in the coming months, we should expect to see exports and imports improve as bottlenecks are dealt with through the supply chain and goods flow much more freely globally.