- The trade balance narrowed to $1.0 billion in April. Nominal exports increased 1.3% and imports fell 1.4%
- Export volumes rose 1.1% (~1.5% excluding energy products), but in large part due to a big surge in gold exports. Imports volumes fell 2.1%.
The improvement in the April trade balance was larger than expected, but the details were not as strong. Export volumes jumped 1.1%, but a big chunk of that came from the a 15% surge in exports of metal and non-metallic mineral products That reflected higher gold exports, an often-volatile component, that is not likely to be repeated going forward. A big 2.1% drop in import volumes helped make the net trade balance look better in April – and we continue to expect net trade will retrace about half of the large 4 percentage point drag on overall Q1 GDP growth in Q2. But lower imports of electrical equipment and the continued retracement of a huge surge in aircraft imports in January also suggests that business investment spending in Q2 will retrace a big chunk of the 40% Q1 gain.
Broader trends for exports still look relatively uninspiring, non-energy exports are still up only modestly from a year ago by our count. That is not new, but the US-led escalation in global trade tensions over the last couple of months also leaves some downside risk. Not all the recent trade news for Canada has been bad with steel and aluminum tariffs, and Canadian retaliatory actions, also being removed. That makes even the latest escalation in US trade tensions look a little bit more manageable. A bounce-back in oil production after mandated production cuts in Alberta and better weather still leave overall GDP growth on track to bounce-back to a slightly above-2% rate in Q2. But it is Canada’s deep ties with the US industrial sector – which stands to bear the brunt of escalating US trade tensions to-date – that are keeping the near-term Canadian trade risks to the downside.
