- Both goods exports (-4.7%) and imports (-3.5%) fell sharply already in March
Services trade was softer - April numbers to be worse though early signs of recovery emerging
Canadian trade flows plunged lower in March as social/physical distancing measures kicked in aggressively in the second half of the month. The declines in goods trade was not as eye-popping as some of the other economic releases to-date considering typical monthly volatility in the data, although the drop in merchandise exports was still the biggest since last June. Auto exports accounted for a large chunk of the drop as production at North American plants was shuttered.
As with other early economic indicators for March, though, goods-sector weakness was initially outpaced by a pullback in the service-sector. Exports of services plunged 7.2% in March as travel and transportation services fell dramatically. Imports fell a larger 11.5%, so the net balance on services trade actually improved. The deterioration in the goods trade balance was also smaller than we assumed. But the sharp drop in trade flows was consistent with a sharp drop in economic activity both in Canada and abroad. And both trade flows and broader economic numbers will be dramatically worse in April. Green shoots have begun to emerge beyond that with the spread of the virus slowing, and activity restrictions in a growing list of regions beginning to ease. April may well turn out to be the bottom of the latest downturn, although that bottom will prove to be unprecedentedly low.
