Trade Balance Ticks Higher

• Canada’s merchandise exports rose 2.0 per cent (month-on-month) in June, while imports rose 1.7 per cent. As a result, Canada’s merchandise trade surplus with the world widened from $4.8 billion in May to $ 5.0 billion in June.
• Total exports rose for the sixth consecutive month to $ 69.9 billion in June. Exports of energy products were up 3.2 per cent to $ 21.0 billion in June, representing 30 per cent of total exports. While energy products were crucial to the gain in total exports, non-energy exports also increased by 1.4 per cent.
• Total imports increased by 1.7 per cent to $64.9 billion, recording a fifth monthly gain. Imports of energy products (+22.3 per cent) contributed the highest to the increase in total imports. Refined petroleum products led the way, rising 32.5 per cent to a record high of 1.9 billion—not just on price growth but on volumes too.
• Exports to the United States continued to rise, increasing 1.2 per cent in June, principally driven by higher crude oil exports. Imports from the United States edged up 2.6 per cent. As a result, Canada’s trade surplus with the United States narrowed from its historic high of $13.6 billion in May to $13.2 billion in June.

Key Insights

With the sailing of the first ship carrying Ukrainian grain (corn) leaving Odesa, global grain prices are forecasted to ease after a 40 per cent spike to a record high in March. There are 16 more full ships queued up to depart from Ukraine carrying wheat, sunflower seeds, corn, and sunflower oil. Price impacts will settle but will remain elevated. Improvements in food prices will take time.

Tempering consumer spending south of the border will hamper the prospects for most non-energy merchandise exports. As witnessed by the June numbers, a decrease in consumers’ appetite for big-ticket spending has resulted from higher inflation and interest rates. Slowing demand in the construction sector has also reduced lumber prices. This is likely to spill over to other sectors such as exports of motor vehicles and parts as American households tighten their purse strings and cut back on spending.