Surging Canadian Exports Drive a Surprise Trade Surplus in May

Jul 03 19, 13:46 GMT

Canada posted a $0.76 billion trade surplus in May following an upwardly revised $1.1 billion deficit in April (previously reported as a $0.97 billion deficit). This came against consensus estimates for a $1.7 billion deficit. Exports advanced an impressive 4.6% (m/m) to $53.1 billion, while imports were up 1% to $52.3 billion.
After accounting for price changes, the picture was still solid. Export volumes were up a significant 4.0%. Import volumes were up 1.2%.
The surge in exports was relatively broad-based, spanning 9 out of the 11 product categories. Leading the way were increased exports of motor vehicles and parts (+12.4%) and the volatile aircraft and other transportation equipment category (+33%). Exports of energy products (+5%) and metal ores and non-metallic minerals (+24.3%) were also strong. The spike in some of these categories was partly due to transitory factors, including a resumption in activity in motor vehicle production plants following the shutdowns in April.
Imports were up in 6 out of the 11 product categories, but were mainly driven mainly by increased imports of aircraft and other transportation equipment (+14.2%) and motor vehicles and parts (+1.6%).
Canada’s merchandise trade surplus with the U.S. widened to $5.9 billion, its widest since 2008. Its merchandise trade deficit with the rest of the world narrowed to $5.2 billion.

Key Implications

Overall, there is little to complain about in this release. Part of the unexpected surge in May’s exports should be discounted given the one-off transactions (resumption of motor vehicle production following shutdowns, spikes in the volatile aircraft and boats and other transportation equipment categories). Still, a solid report is a solid report, with today’s data revealing an encouragingly broad-based May export picture.
May’s international trade data joins a suite of other data releases confirming that the Canadian economy is recovering from the soft patch seen in late 2018 and early 2019. Today’s print adds some further upside to our 2.5% tracking for Q2 GDP.