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Trade deficit hits a modern-day record as energy exports plunge

Published by Brad Fougere on May 05, 2015

Canada’s monthly trade deficit reached its highest level in a generation as lower energy prices weighed on US-bound exports in March. Overall exports were up 0.4 per cent over February’s levels to reach $42.5 billion for the month. However, a 2.2-per cent increase in imports in March, combined with weak energy exports and a significant downward revision to February’s trade numbers, pushed Canada’s trade deficit to $3.0 billion – its highest level since at least 1990.

Canada’s declining trade performance can be pinned almost entirely on the impact of lower energy prices on the value of exports. Energy exports fell 8.9 per cent in March as refined petroleum, crude oil and natural gas sales were all sharply lower. Outside of the energy sector, the picture improves considerably as all other exports were up 2.4 per cent for the month. 

Even so, Canadian exporters outside the energy sector have done little so far to pick up the slack from plunging energy exports. Since last July, total exports have fallen by 6.7 per cent, driven down by a 38.5 per cent decrease in foreign sales of energy products. However, non-energy exports have been relatively flat over that period, rising by just 3.6 per cent in eight months.

On a sector-by-sector basis, Canada’s export performance was mixed in March. Aside from the steep drop in energy sales, aerospace exports were also down sharply (10.0 per cent). There were also modest decreases in exports of machinery and equipment, as well as agriculture and food products.  Offsetting those losses to some degree was a strong rebound in shipments of motor vehicles and parts which had fallen by nearly 15 per cent in February because of plant retooling. Exports of forestry products, metals and minerals, and petrochemical products were all higher as well.

On a provincial basis, export patterns largely reflect the importance of the energy sector to each jurisdiction. For the first quarter of the year, exports from Alberta are down 18.5 per cent, while the decrease in Newfoundland and Labrador is 38.8 per cent. Exports from Nova Scotia and New Brunswick are lower as well. All other provinces have posted solid net export gains compared to the first three months of 2014.

As nearly all of Canada’s energy exports are destined for the US market, overall exports to that country were down 0.9 per cent in March and 2.4 per cent for the first quarter of 2015 compared to the same period last year. By contrast, March saw a spike in exports to Japan and to the European Union.

On the import side, sales of foreign goods into Canada were up in seven of the eleven major product categories. Leading the way were higher imports of consumer goods (7.9 per cent growth compared to February) and motor vehicles and parts (3.7 per cent). Imports of aerospace products, metals, minerals and related goods were all lower.




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