Net exports to contribute positively to Canada real GDP growth in Q1 2015

Canada's merchandise trade deficit widened to $3.0 billion in March from $2.2 billion in February (revised from a deficit of $1.0 billion last month due to updated estimates of energy exports). March's print was the result of a 0.4% m/m increase in nominal exports being more than offset by a 2.2% advance in imports.

Today's trade release provides a great deal of clarity on the role net exports are going to play in the first quarter of 2015. Indeed, the decline in export prices due to the lower energy prices and weaker loonie comes as little surprise, as does the advance in export volumes. Ditto for the increase in import prices and pull back in import volumes.

Net exports are expected to contribute positively and significantly to real GDP growth in the first quarter of 2015, in the order of around 1 percentage point. However, today's trade data does little to change our view for real GDP in Q1, which is for growth of around 0.0% with some modest upside potential.

"This leaves our view for Q1 real GDP growth in line with the Bank of Canada. As such, we expect the Bank will remain comfortable with its outlook for the Canada economy, and will keep interest rates on hold until the end of 2016." said TD Economics