Canadian trade deficit narrows slightly in November on fall in imports

Canada’s trade deficit narrowed in November. The deficit came in at a CAD 1.1 billion, narrowed from a revised CAD 1.6 billion in October and slightly narrower than the CAD 1.2 billion consensus expectation. The narrowing in the deficit was boosted by a 2.4 percent sequential fall in imports, although exports also dropped 1.4 percent.

Excluding price impacts, the picture was worse, with export volumes dropping 2.7 percent while import volumes fell 1.3 percent. The fall in exports was seen in seven of the 11 major categories, but was greatly driven by energy exports, which fell 7.4 percent, on lower exports of crude oil. Volumes were the story for crude oil, after shipments were disrupted by a pipeline rupture that was seen in late October. Statistics Canada saw that the widespread fall in exports coincided with the CN Rail strike, with shipments by rail much lower than the same month in past years. Exports of metal and non-metallic mineral products surged, providing a partial offset.

Exports of agricultural products also grew 9.6 percent in the month, lifted by shipments of canola and soybeans to Europe. Exports of motor vehicles and parts came in flat. Falling shipments of passenger cars and light trucks countered the bounce-back in exports of motor vehicle engines and parts that came in the wake of the strike ending.

Imports fell in 10 of the 11 categories. Lower imports of aircraft and other transportation equipment and parts led the fall, including for airliners and railcars. Imports of energy products also fell considerably in November, mainly on the back of lower import volumes for natural gas.

The nation’s merchandise trade deficit with the U.S. narrowed from CAD 5.1 billion to CAD 4.2 billion in November. Canada’s merchandise trade deficit with the remainder of the world narrowed from CAD 6.7 billion in October to CAD 5.3 billion in November.

Today’s was a soft report, with widespread falls in imports and exports, noted TD Economics.

“The weak report introduces significant downside risk to our fourth quarter growth forecast, with a sub 1% print looking like a distinct possibility. And, with October and November data at hand (and barring significant revisions), net trade looks to subtracted from economic growth in the quarter. The data also raises the probability that manufacturing shipments (released later in the month) also dropped in November”, said TD Economics.

A weak global growth backdrop, lingering trade uncertainty and competitive pressures might mute export growth. In the meantime, import growth is expected to be restrained by decelerating domestic demand.

“These dynamics point to net trade making little, if any, contribution to growth in coming quarters”, added TD Economics.