Highlights:
- Canada’s nominal trade deficit narrowed sharply in April, to $1.9 billion from $3.9 billion in March
- Export volumes rose 1.3% to build on a 3.3% March increase. Import volumes fell 1.9% but that only partially retraced a 4.7% jump the prior month.
- Non-energy export volumes rose 1 1/2% in April to build on a 2 1/2% increase in March — although were still up just 1 1/2% from a year ago.
Our Take:
The improvement in the nominal trade deficit to $1.9 billion more-than-retraced a surprisingly large deterioration to $3.9 billion in March from $2.7 billion in February — and with relatively solid underlying details. The 1.6% increase in nominal exports built on a 4% increase in March and was largely the result of higher volume sales rather than prices. The 1.3% increase in export volumes was led by a 1 1/2% rise in non-energy sales abroad that built on a 2 1/2% March increase. The almost 2% drop in import volumes only partially retraced a 4.7% gain the prior month as motor vehicle and consumer goods purchases eased lower after big March gains. Equipment import volumes, a key indicator of domestic investment spending, also ticked lower but the April level was still above its Q1 average.
The monthly trade data is notoriously volatile, and non-energy export volumes were still up just 1 1/2% from a year ago in April, despite an improved global trade backdrop. Exports going forward will also have to contend with new U.S. steel and aluminum tariffs in June — although we continue to think the broader macroeconomic impact of those will be limited. Nonetheless, improvement in the trade data over recent months adds to the evidence that Canadian economic growth picked up in Q2 after a sharp pullback in home resales alongside transitory disruptions to oil production and transportation backlogs combined to weigh on Q1. We continue to expect a 2 1/2% increase in Q2 GDP following the 1.3% Q1 gain.
