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As expected, tumbling crude oil prices drove Canadian exports down sharply in August, ending a two-month run of strong gains. Merchandise exports decreased by 3.6 per cent compared to July – the largest single-month decline since January 2012. Total exports dipped to $44.0 billion for the month, well below the revised $45.6 billion figure for July, but still comfortably higher than at any point this year before June. Meanwhile, imports into Canada rose for the fourth consecutive month, driven higher by price increases stemming from a weaker exchange rate.

Canadian Trade Summary
  May-15 Jun-15 Jul-15
Value ($billions)
Exports 44.5 45.6 44.0
Imports 45.1 45.3 46.1
Trade Balance -2.9 -0.8 -0.6
Percentage change
Export prices 0.4 1.2 1.5
Export volumes -1.7 3.7 1.0
Import prices -0.2 1.4 2.0
Import volumes -0.6 0.2 0.4

The combination of higher imports and lower exports – along with a significant upward adjustment to July’s import numbers – has dramatically changed the picture for Canada’s balance of trade. After posting a record $3.6-billion trade deficit in March, the gap narrowed to a reported $593 million in July. However, revised figures now put July’s deficit at $818 million, and today’s numbers place the monthly deficit at $2.5 billion for August.

Most of August’s decline in exports can be pinned on the impact of crude oil prices. The cost of a barrel of West Texas Intermediate fell nearly 16 per cent in August and that had a direct impact on Canadian trade. Crude oil producers actually exported 4.3 per cent more oil in August than in July, but received far less revenue for their efforts. Overall, the value of crude oil exports fell by 20.9 per cent in just one month. Refined petroleum products were down a comparatively modest 6.1 per cent.

However, the energy sector only accounted for about two thirds of the decline in exports in August. Foreign sales of non-energy goods were down as well – about 1.5 per cent compared to July. Exports of consumer goods fell nearly 8.0 per cent, while shipments of metal products were also down significantly, driven lower by the precious metals sub-sector. The notoriously volatile aerospace sector also had a bad month, with exports down 11.6 per cent.

On the positive side, exports of metal ores and potash were up strongly in August, while producers of motor vehicles and parts, electrical/electronic equipment, and wood building materials also saw international sales rise.

At the provincial level, export performance was mixed. Ontario and Newfoundland and Labrador saw the largest dollar-value growth in August. In Ontario, the 6.2 per cent increase was driven almost entirely by motor vehicles trade, while Newfoundland and Labrador’s 66 per cent increase represented a recovery in refined petroleum sales. Manitoba and PEI also saw solid export growth in August. Those gains were offset by losses in Quebec and Alberta, impacted by lower aerospace and energy exports, respectively. BC and New Brunswick also posted declines.

Given that Canada sends nearly all its crude oil to the US, exports to that country were unsurprisingly lower in August – down more than $1.0 billion compared to July. Shipments to the European Union were also down significantly, led by the United Kingdom, where exports fell by $516 million. Canadian businesses improved their sales in Norway (up $117 million), Saudi Arabia ($81 million) and the Netherlands ($44 million) in August.

On the import side, sales of foreign goods into Canada were driven higher by sales of manufactured goods. Industrial machinery and equipment imports were up 8.0 per cent, while electronics and electrical product imports were 7.9 per cent higher. Canada also imported more aircraft and other transportation equipment in August.

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