- Canada posted a $1.1 billion trade deficit in October, up from a revised $1.2 billion deficit in September (previously reported as $0.98 billion). The deficit was slightly narrower than the $1.45 billion consensus expectation. Exports were up 0.8% to $49.9 billion, while imports increased 0.5% to $51 billion.
- After stripping out price impacts, the picture was similar, with export volumes up 0.7% and import volumes up 0.8%.
- The increase in exports spanned 6 of the 11 categories, but was largely driven by one-off transactions in the consumer goods industry (+5.5%). Statistics Canada attributes this to a spike in artwork exports to the U.S. for a fair, which could potentially be reversed if not sold. Energy product (+3.4%, mostly due to higher oil prices) and metals and non-metallic mineral product exports (+5.7%, driven by gold shipments) were also solid. Providing some offset were lower exports of motor vehicles and parts (-2.9%) and a significant drop in farm, fishing and intermediate food products (-10.9%). The latter was driven by lower crop exports to China.
- On the other hand, imports were up in 7 of the 11 categories. Higher energy imports (+8.9%) drove the increase. Providing some offset were lower imports of motor vehicles and parts (-3.3%).
- Canada’s merchandise trade surplus with the U.S. widened from $4.6 billion to $5.5 billion. Its merchandise trade deficit with the rest of the world increased to $6.6 billion, from $5.8 billion in the month prior.
Key Implications
- October’s trade report was decent, but does little to change the narrative of a soft export backdrop in the second half of 2019. It is important to highlight that driving this month’s increase in exports are one-off transactions (artwork) that could be partially reversed.
- Against lingering trade uncertainty and subdued global trade volumes, net trade is unlikely to be a meaningful growth contributor in the near term. The fact that manufacturing sentiment remains in contractionary territory south of the border means that previous pockets of solid demand may not provide as much support in the months ahead.
