- Canada posted a $3.2 billion trade deficit in March, down from a revised $3.4 billion deficit in February (previously reported as $2.9 billion). This was higher than consensus estimates for a $2.4 billion deficit. Exports advanced 3.2% to $49 billion, while imports rose 2.5% to $52 billion.
- After accounting for price changes, the picture was encouraging. Export volumes accounted for a large chunk of the increase, up 2.6%. Import volumes were up 1.3%.
- Exports saw a relatively broad-based rebound, increasing in 9 out of the 11 broad categories. Nominal energy exports were up 7.7%, with crude oil volumes posting an encouraging 3.1% gain (+5% in nominal terms) after slumping in February. Excluding energy products, exports were up 2.1%. Other categories that contributed to the rebound include motor vehicles and parts (+5.6%), and basic and industrial chemical products (+7.9%). Metal ores and non-metallic minerals (-8.1%) and metal and non-metallic mineral products (-3.7%) provided some offset.
- The increase in imports was also relatively broad-based, spanning 8 of the 11 categories. Particularly notable was a strong increase in imports of consumer goods (+6.7%), motor vehicles and parts (+4.9%), and industrial machinery and equipment (+2%). Imports of energy products also increased 4%. Providing some offset was a large drop in the volatile aircraft and other transportation equipment category (-20%), after strong climbs in the prior months.
- Canada’s merchandise trade surplus with the U.S. grew to $3.6 billion, but its merchandise trade deficit with the rest of the world widened to a record $6.8 billion.
Key Implications
- Canadian international trade finally bounced back to life in March with a healthy export volumes print. Additionally, the rebound in consumer-related and M&E imports is a positive sign for domestic demand. Of course, one month of data doesn’t make a trend, and the fly in the ointment in this report is a substantial downward revision to the prior month’s data. On the whole, export volumes were still down a significant 2.4% in the first quarter.
- The positive report offers a decent and encouraging handoff to the second quarter. For Q1, however, the release leaves our GDP tracking unchanged near 0.6%, largely due to the downward revisions for the prior month. The key message remains that the Canadian economy has hit a soft patch in the first quarter of 2019.
