Canada’s merchandise trade balance flipped back into black ink after December’s deficit, which was revised downward to $863 million. January’s surplus was modest at $496 million, as exports fell less than imports.
Exports fell by 1.7% month-on-month (m/m) in January, a third consecutive pull back. The contribution was broad-based, with 8 of 11 sectors posting a decrease. Exports of metal and non-metallic products (-6.2% m/m) and aircrafts and other transportation equipment (-13.9%) contributed most to the decline. Offsetting some of the drop was a second consecutive month of motor vehicle and parts export gains (+2.6% m/m).
Meanwhile, total imports for January fell by a larger 3.8% m/m. After consumer goods posted their largest monthly import reading in December, January saw a heavy giveback, with consumer goods falling by 7.1% m/m. Motor vehicle and parts imports also fell by 5.1% m/m. A 3.6% m/m import gain in energy products offset some of the total decline. Imports in 7 of 11 sectors were down.
In volume terms, overall imports declined by 4.3% m/m in January, while export volumes edged down by a more modest 1.7% m/m.
Canada’s trade surplus with the United States widened from $8.6 billion in December to $8.8 billion in January.
Key Implications
Recently released GDP numbers for Q4-2023 showed exports leading the charge, contributing the most to quarterly growth. With January trade data in the books, early tracking for net trade won’t be as much of a tailwind in Q1-2024. Further, January’s data highlights a general slowing in external demand, as export volumes have declined for three consecutive months.
Imports, a barometer for domestic demand, gave back some of their year-end uptick, suggesting the strength of the Canadian consumer is continuing to wind down. This is consistent with Statistics Canada’s guidance for January’s retail sales and our own view of weaker spending over the first half of the year.
