- Canada recorded a trade surplus of $594 million in April, following a deficit of $1.3 billion in March. Merchandise exports were down 1% (m/m), but merchandise imports fell by even more (-4.7%). The picture was less encouraging after accounting for price effects, with export volumes down 3.5% and import volumes down 6.8%.
- The decline in exports spanned 6 of the 11 industries. The culprit was the motor vehicles and parts category (down 18.1% on the month), where the global semiconductor chip shortage was still weighing on output. Excluding this industry, exports were up 1.6%. Statistics Canada cited that the impact of these disruptions will be reduced (though not necessarily eliminated) in May. Exports of consumer goods (+14.4%) provided a partial offset. According to Statistics Canada, this was driven by a spike in the exports of packaged seafood products.
- The decline in imports was more broad-based (9 of the 11 industries), and follows a sizeable 6.1% lift in March. It was similarly led by a pullback in imports of motor vehicles and parts (-22.1%).
- In a separate release, Statistics Canada also revealed that services exports were down 2.2% in April, whereas services imports were up 2.2% on the month.
Key Implications
- Net trade was not spared the temporary weakness seen in Canada’s economy during the spring. However, the softening momentum in trade appears to be predominantly caused by global supply chain disruptions – a hinderance that isn’t limited to Canada’s economy.
- Looking ahead, the underlying foreign demand picture for exports remains solid. Canada’s largest trading partner, the U.S., is witnessing a strong economic rebound and solid manufacturing sentiment readings, supported by an early reopening and sizeable fiscal stimulus. Services exports should also receive a lift once second-dose vaccination rates accelerate and international tourism and on-campus post-secondary education are permitted to resume. That said, supply chain disruptions in the form of input shortages and longer supplier delivery times, often cited in manufacturing sentiment reports, may introduce more volatility in the data.
