Canada’s merchandise trade surplus notched its fourth consecutive month in black ink. However, November’s surplus narrowed to $1.6 billion as imports rose and exports edged lower. This comes after October’s surplus was revised upward to $3.2 billion.
Exports fell slightly by 0.6% month-on-month (m/m) in November, the first decline in four months. The contribution to the drag was narrowly-based, driven by a -16.8% decrease in aircraft and other transportation equipment exports. In fact, 7 of 11 sectors posted a rise in exports, including a 1.3% m/m increase in energy product exports and a 4.4% m/m increase in industrial machinery exports.
Meanwhile, total imports increased by 1.9% m/m in November, with 8 of 11 sectors rising on the month. Imports of energy products (11.6% m/m) posted its first increase after two consecutive monthly declines. Meanwhile, imports of machinery and equipment were up by 4.9% m/m and imports of electronic and electrical equipment rose by 4.7% m/m.
In volume terms, overall imports increased by 1.6% m/m in November (after a large 3.5% m/m drop the month prior), while exports edged down slightly by 0.1% m/m.
Canada’s trade surplus with the United States narrowed from $12.1 billion in October to $11.7 billion in November.
Key Implications
October and November trade data suggests that net trade may shape up to be a tailwind for fourth quarter growth. This would mark a reversal from last quarter’s significant growth revisions that hit net trade more than any other GDP component. The solid performance of the Canadian dollar at the end of 2023 (up over 2% versus the USD in December), may potentially dampen export activity in next month’s trade reading.
Despite the potential positive effects from trade in the fourth quarter, overall Canadian economic growth is expected to be weak as domestic and international activity slows. Imports, a barometer for domestic demand, have been effectively flat (in real terms) over 2023.
