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Merchandise Trade Analysis – February 2016

Exports fall sharply from January's record highs

After setting a new all-time high in January, Canadian exports fell back sharply in February, driven down by weaker sales of energy products and consumer goods. Overall, exports fell 5.4 per cent from a revised $46.2 billion in January to $43.7 billion in February. That loss effectively wipes out the significant gains exporters saw in the two previous months, returning total exports to about November's levels. 

Canadian Trade Summary
  Dec-15 Jan-16 Feb-16
Value ($billions)
Exports 45.3 46.2 43.7
Imports 46.1 46.8 45.6
Trade Balance -0.8 -0.6 -1.9
       
Percentage change
Export prices 0.2 0.9 -3.0
Export volumes 2.8 3.2 -2.3
Import prices 0.9 2.1 -2.4
Import volumes 0.8 1.6 -1.1


In fact, February was a gloomy month for trade across the board. Imports were down significantly as well, dropping by 2.6 per cent to $45.6 billion. Since the decrease in imports was significantly less than the decrease in exports, however, Canada's monthly trade deficit ballooned from a revised $628 million to just over $1.9 billion - its highest level since October.

Trade Balance

The decline in both imports and exports was the result of a combination of price and volume effects. On the export side, the prices that Canadian businesses received for their goods fell by 3.0 per cent, while the volume of exports they sold was down 2.3 per cent. Normally, such price effects are concentrated in the energy sector or the result of a sharp decline in the exchange rate. While both oil prices and the Canadian dollar were down in February, the decrease in export prices was far deeper and broader than can be easily explained by energy prices and exchange rate effects. For its part, the decrease in export volumes was largely concentrated in lower sales of consumer goods and industrial machinery.

Merchandise Trade

The story was much the same on the import side as well. Canadians bought fewer foreign goods - import volumes were down 1.1 per cent - even though they were cheaper - import prices fell 2.4 per cent. Canadians enjoyed low prices on a wide range of imports, while the volume effects were largely concentrated in lower imports of foreign energy products.

Export growth

Looking at specific industrial categories, exports were down in most product groupings. Of the 11 major product categories, seven posted lower numbers in February. The largest declines were in consumer products and energy products, both of which fell by more than 14 per cent. In the case of consumer goods, that decline effectively offsets a similar-sized spike in exports in January, suggesting that January's numbers may have been inflated by one-time sales.

One of the few bright spots in February was the aerospace sector where foreign sales jumped more than 25 per cent. Even there, however, the increase represents little more than a recovery from an unusually poor January.

Price and Volume

Most of the decline in exports in February came from lower sales into the United States. Exports to the US fell by nearly $2.0 billion - accounting for four fifths of the overall $2.5 billion decline that month. Although comparatively modest, exports to Italy, Hong Kong, China and Switzerland were also down. Meanwhile, Canadian businesses made modest gains into the UK and Japanese markets.

On the import side, the story was much the same. Imports from the US were down $844 million in February, accounting for most of the overall decline of $1.2 billion. The UK and China were among the few countries from which imports rose in February.

Top Growing Exports

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