E-Sight January 7: Canada’s trade deficit narrows, but export growth is slowing

Canadian international merchandise trade continued to slow in November, with exports increasing only 0.5%. Although there was some growth, seven out of eleven product categories posted declines in November. Imports fell 0.3% in November, narrowing the trade balance to -$3.3 billion, compared to -$3.7 billion in October. In volume terms, exports grew by 0.9% while imports fell 0.7%. Given that 2020 was the year of recording-breaking monthly plunges and rebounds, Statistics Canada notes that November had the smallest monthly percentage change in 2020.

The pandemic has created a unique set of circumstances that is driving Canadian copper and ore exports. Exports of metal ores and non-metallic minerals saw significant monthly growth, rising 26.0% in November. With rising prices, strong foreign demand and supply issues in other countries, Canada has taken advantage of new opportunities. The exports for this product category is atypical for November, with these exports rising 40.3% compared to November 2019.

Exports of gold to the United Kingdom also surged during the month, contributing to overall export growth. A rise in sales in the UK for cast gold bars and higher gold transfers within the banking system drove Canadian metal exports. Exports of metal and non-metallic mineral products rose 11.6%.

While metals and minerals drove growth this month, most other product categories pulled it back down. One area to note is forestry products and packaging materials, which saw exports rise to above pre-pandemic levels as early as August. The category fell 6.2% in November after posting six months of consecutive increases. Lower lumber prices were the main reason for the drop, but they remained significantly higher compared to May when the lumber prices rally began.

Other declines in November included a 5.1% drop in consumer goods exports; a 4.1% decline in motor vehicles and parts exports; and, a 3.1% fall in electronic and electrical equipment and parts.

Another trend heightened by the pandemic is a shift of exports to non-US trading partners. Exports to countries other than the US grew 7.4% in November. The demand for gold in the UK alone contributed to a 50.1% monthly increase in trade with the UK. Meanwhile, trade with the US declined this month by 2.2%. Compared to November 2019, Canadian exports to its largest trading partner fell 8.9%.

November’s trade numbers don’t provide much optimism for a trade-driven recovery in 2021. As a global second wave of the virus began to take hold in November, and lockdowns brought on by the holiday season, our most recent economic outlook (https://bit.ly/34ra2lK) predicts weakness in exports until the second half of the year.

Categories: E-Sight, Economics

Tags: , , ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: