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Merchandise Trade Analysis – October 2015

Canadian merchandise exports were down once again in October, marking the third consecutive month of decline. Overall, exports fell by 1.8 per cent compared to September, adding to declines of 1.4 per cent and 3.0 per cent in the previous two months, respectively. At $43.0 billion for the month of October, exports were at their lowest level since May.

For the second straight month, Imports into Canada were down as well in October, albeit at a much slower rate (0.8 per cent).  As a result, Canada’s trade deficit rose from $2.3 billion in September to just under $2.8 billion in October.

October’s decline in exports was due to a combination of price and volume effects. Not only did Canadian businesses sell fewer goods abroad, but on average, they charged less for those goods. The story was largely the same on the import side. In spite of a slight uptick in the exchange rate in October, Canadians paid less for imports than they did in September, while also buying slightly fewer foreign goods.

Unlike the previous two months, the decline in exports in October had nothing to do with energy products or the price of crude oil. After tumbling in August and September, energy exports were essentially flat in October. However, exports were down in nearly every other major sector of the Canadian economy. Most notably, sales of agricultural products fell by 9.1 per cent in just one month as exports of livestock, canola and other crops (except wheat) were all sharply lower. Exports of basic and industrial chemicals were down by 10.7 per cent in October, while exports of metals, minerals and products made from those materials were also lower. The decline was especially pronounced for copper, potash and diamonds.

The only major product grouping to see exports rise in October was industrial machinery and parts; foreign sales of those goods expanded by 1.1 per cent. Exports of consumer goods and motor vehicles were only slightly lower.

At the provincial level, there was red ink virtually across the board. Saskatchewan and Ontario were the only provinces to post gains in October, with exports rising by 4.1 per cent and 2.3 per cent, respectively.  Exports from all other provinces were lower, with especially steep declines in Atlantic Canada and in Alberta. On the east coast, exports fell by between 13.3 per cent (in PEI) and 23.2 per cent (in New Brunswick). For its part, Alberta’s exports fell by 14.7 per cent in just one month.

Looking at specific markets, October’s decline was heavily concentrated in the United States, where exports fell by 2.8 per cent – equivalent to $937 million. That total accounts for about two thirds of the overall drop in exports in October. Exports to Hong Kong – a major global shipping hub – were also down more than $200 million. 

Offsetting those losses to some degree was an increase in exports to the United Kingdom and to Australia. Trade with the UK can be volatile from one month to the next and October was a good month – exports were up $436 million to reach just under $1.6 billion. For their part, monthly exports to Australia spiked up 78 per cent in October (a $110 million increase).

On the import side, Canadians bought fewer foreign electronics and consumer goods, as well as less crude oil and natural gas liquids. Imports of food products, metals and minerals, along with motor vehicles, were all higher in October.

 

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