Canada’s trade position improved in April, but the size of the deficit is still concerning

Canada's merchandise trade deficit narrowed to $2.97 bln in April, though that was much wider than expected as March's shortfall was revised to a record $3.85 bln (from $3 bln previously). The shockingly weak March revision is due to a downward revision to exports, which are now down 0.5% after an initial positive print, while imports were revised up more than one percentage point to +3.6%, a four-year high.

Adjusting for price changes, export volumes rose 0.2% while imports dropped 2.5% in April. Non-energy export volumes, which the BoC is watching closely, fell 2.5% and are down in three of the past four months-not terribly encouraging. 

"Canada's trade position improved in April, but the size of the deficit is concerning. On the bright side, there should be some improvement over the coming months, with oil prices rising modestly and U.S. demand expected to improve. But if that U.S. strength doesn't materialize, these numbers might be suggesting that the loonie needs to weaken even further to narrow Canada's trade deficit." - said BMO Capital Markets in a report