- Canada’s trade deficit in goods narrowed slightly to $1.1 billion
- Labour disruptions reduced both exports and imports of autos and parts
- Higher prices supported energy exports
Canada’s trade deficit unexpectedly narrowed in October as a strike in the US auto sector (which prompted temporary layoffs here in Canada) seemed to weigh just as much on imports as it did on exports. Non-energy export volumes still managed to post a decent increase but are only displaying a faint pulse, down 0.3% from a year earlier.
Despite a slightly better than expected outcome in October, we continue to think trade will act as a drag on growth again in Q4. A challenging global backdrop has made 2019 a year to forget for exporters, but as the BoC noted yesterday, there is “nascent evidence” that global growth is stabilizing. Perhaps more importantly, Canada’s economy has continued to display resilience in other sectors, particularly services. In fact, services data released today (alongside the goods numbers for the first time) showed services exports were up more than 5% from a year earlier. It is that resilience, as well as concerns about household debt, that has the BoC sounding more reluctant to lower interest rates.
