Canada – In October, the merchandise trade deficit narrowed to C$1.1 billion (its lowest level since January) after widening to a revised record high of C$4.4 billion the prior month. In nominal terms, exports rose 0.5% while imports sank 6.3% after registering an outsized increase the previous month. The energy trade surplus grew to C$4.6 billion (its highest level since June 2015) as exporters benefited from both higher prices and higher volumes. The non-energy trade deficit improved to C$5.7 billion, a three-month best. In real terms, exports fell 0.9% while imports tumbled 7.4%, more than reversing the prior month’s surge. The weakness in two-way trade was disappointing. The slump in imports was attributable primarily to sharply lower imports of industrial machinery (these had surged the prior months thanks to a module destined for the Hebron offshore oil project in Newfoundland and Labrador),and sharp drops in energy products, and metal ores and non-metallic minerals. Exports were up, helped by higher prices, while overall volumes were down – gains for energy were more than offset by declines for non-energy products. The latter are now 9% below their peak of nine and a half years ago (chart).
As a result, goods exports are on track to recording a drop of about 7% annualized in real terms in Q4 while imports are headed for an even steeper fall of 18%. In other words, trade may be contributing to GDP growth in the quarter, but not for the right reason.
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