- The trade balance unexpectedly swung to a surplus in May
- Exports surged 4.6%, 4.4% excluding price impacts
- Import volumes rose 1.3% as equipment imports rose
The Canadian net trade numbers are notoriously volatile and revision-prone. And part of the swing in the trade balance to a $0.8 billion surplus – the first positive balance since July 2018 – was due to one-off factors that won’t be repeated. A bounce up in motor vehicle exports was a retracement from earlier transitory production disruptions and a surge in transport equipment sales to Saudi Arabia presumably won’t be repeated. We don’t expect the surplus position will last. Still, the recovery in export volumes over the last couple of months just adds to the list of evidence that economic growth bounced-back in Q2 after transitory factors (bad weather, Alberta oil production curtailments) held back growth over the winter. An increase in equipment imports in May also is a positive sign for Canadian business investment.
The unpredictability of the US approach to international trade negotiations still leaves significant uncertainty about the future trade backdrop, but the economic data in Canada has also looked significantly better recently – and that is a big reason why markets are pricing in significantly lower odds of interest rate cuts from the Bank of Canada than elsewhere.
