Canadian merchandise trade deficit at lowest level since October

But future trade uncertainty being sited by economists as a concern

Mario ToneguzziCanada’s merchandise trade deficit with the world narrowed from $2.3 billion in March to $966 million in April, the lowest deficit since October 2018, according to Statistics Canada.

The federal agency reported on Thursday that Canada’s exports rose 1.3 per cent in April, due mainly to higher exports of gold. Imports decreased 1.4 per cent, mostly on lower imports of aircraft. As a result, In real (or volume) terms, exports were up two per cent and imports fell 1.9 per cent, explained StatsCan.

Canada had lower exports of canola (-14.7 per cent), for which there were no shipments to China in April. For the year 2018, 47.5 per cent of Canadian exports of canola were destined for that country, it said.

“Despite a modest decrease in exports of energy products (-0.5 per cent) in April, there were large fluctuations in some categories within this section. Exports of crude oil rose 11.7 per cent in April to $7.8 billion, on higher volumes and higher prices. This increase was largely offset by a decrease in exports of natural gas (-45.3 per cent), mainly due to lower prices. This follows harsh weather conditions in the United States, as well as supply constraints that contributed to a 31.8 per cent rise in natural gas prices from January to March,” added Statistics Canada.

Robert Kavcic, senior economist with BMO Capital Markets said “we’ve been banking on better second quarter trade numbers after a dismal first quarter, and this April report delivers a good start.

“Barring major revisions, net exports should add meaningfully to second quarter growth. That, along with some other better recent data flow, supports the story (and the BoCs view) that the fourth quarter/first quarter weakness in Canada was mostly temporary,” he said in a commentary note.

Omar Abdelrahman, economist with TD Economics, said April’s international merchandise trade data joins a suite of other data releases pointing to improving momentum heading into the second quarter.

“Indeed, after exports created a substantial drag on GDP in the first quarter, the March and April data point to an improving trade picture and to net trade contributing positively to growth in the second quarter. Of course, it is important to note that some of the bigger changes this month were in volatile categories (the surge in gold exports and the drop in aircraft imports), but the overall release and trend should still be viewed positively,” he said.

“At the same time, it is important to flag the increasing relevance of trade uncertainty as a downside risk. Affecting Canada recently are issues related to canola shipments to China, which resulted in a 14.7 per cent drop in April. More important, however, are the recent tariff increases (and threats thereof) on Chinese and Mexican goods into the U.S., which may result in spillover effects through confidence and supply chain channels.”

– Mario Toneguzzi for Calgary’s Business

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