- The nominal trade balance improved for a third straight month but was still at an elevated $3.2 billion in March
- Details were somewhat better – export volumes bounced 2.8% after falling 4.6% in February. Import volumes of machinery and equipment bounced back after a disappointing February decline.
The headline trade deficit was still elevated at $3.2 billion but edged lower for a third straight month in March. Details were arguably a little better than that headline itself would imply. A 2.8% bounce-back in export volumes in part reflected a recovery in energy shipments but non-energy export volumes were also up almost 2% by our count. Import volumes also bounced back 1.2%. While not helping with the trade deficit, the composition of that increase – led by a partial recovery in equipment imports from a big drop in February – does seemingly confirm that domestic demand is holding up okay outside of the energy sector.
Bad weather likely had a significant negative impact on transportation capacity in February, and likely was to blame for at least part of what was an ugly-looking drop in trade flows in that month. The bounce-back in March adds to the evidence that the February weakness was more head-fake than a new-trend. Yet, the underlying trade backdrop still looks unspectacular. Non-energy exports were still down from a year ago in March. The U.S. industrial sector, a key customer for Canadian exports, continues to grow but renewed saber-rattling in the U.S.-China trade dispute is still contributing to uncertainty around the future of global trading relationships – with the potential to disrupt Canadian supply chains. The data will do nothing to change the Bank of Canada’s view that further interest rate hikes are not needed at the moment.
