- Canada recorded a merchandise trade surplus of $3.2 billion in June, following a deficit of $1.6 billion in May. Merchandise exports surged 8.7% (m/m), whereas imports fell 1.0%. Stripping away price effects, export volumes advanced an impressive 7.0% while import volumes fell by 2.2%.
- The increase in exports was broad-based, spanning 9 of the 11 industries. Exports of energy products (+22.9%) accounted for nearly half the gain in total shipments as volumes were up strongly in June. Meanwhile, exports of motor vehicles and parts increased 14.9% as work stoppages at assembly plants owing to the semi-conductor shortage were less severe than in April or May. Exports of metal and non-metallic mineral products also posted a hefty gain, rising 12.7%.
- Imports declined in 7 of the 11 industries. Imports of consumer goods (-3.7%) contributed most to the overall decline, partially retracing May’s healthy gain. This category was weighed down by a decline in clothing footwear and accessories, which Statcan noted was in part due to restrictions in some parts of the country and port disruptions in Asia related to COVID-19 outbreaks. Imports of motor vehicles and parts also fell (-3.8%).
- In a separate release, Statistics Canada revealed that services exports were down 0.1% on the month, whereas services imports increased 3.5%.
Key Implications
- In June, Canadian exports benefitted from robust demand for energy products and a rise in auto production. However, production levels remain extremely low in the auto industry, largely reflecting global shortages for semiconductor chips. On the opposite side of the ledger, the drop in import volumes points to some moderation in domestic demand during the month. Notably, import volumes for machinery/equipment and consumer goods both declined, sending a subdued signal for business investment and consumer spending, respectively.
- For the second quarter overall, merchandise export volumes plunged 4.7%, while import volumes were flatter (-0.6%). This suggests that net trade weighed on second quarter economic growth.
- We continue to receive mixed signals on the outlook for trade going forward. We expect global economic growth to continue in the second half, with a strong performance recorded in the U.S. However, the Delta variant is a growing risk. In addition, the recovery in service exports is expected to lag until travel/international tourism restrictions are more significantly eased. Supply chain disruptions are still being reported in manufacturing PMI surveys, suggesting continued volatility in the data going forward.
