February 05, 2020 | 09:02
Cdn. Merchandise Trade Balance (Dec. 2019) — Energized
Canada's merchandise trade deficit narrowed more than expected to $370 mln in December, from a downwardly revised $1.2 bln shortfall in the prior month. Exports jumped 1.9%, fuelled by a 9.5% rebound in energy products. Recall that a pipeline leak/shutdown hit November's trade figures hard, so this is just a reversal of that. The majority of sectors saw gains likely assisted by the end of the rail strike, with raw metals/minerals gaining 16.9%, industrial chemicals/plastic/rubber up 5.9% and forestry up 3.3% (though the latter is still down 11% y/y). That was somewhat offset by a 10.5% plunge in metal/mineral products, which itself was just a reversal of the prior month's surge due swings in shipments of gold bars. Imports rose 0.2%, with gains in consumer goods and aerospace overcoming declines in most other sectors.
In volume terms, exports rose 1.8%, while imports climbed 0.6%. For all of Q4, real exports slipped 5.6% annualized, while imports fell 4.8%, that's an improvement on what we were tracking heading into this report. Accordingly, it looks as though trade will only subtract modestly from Q4 GDP, which suggests the risks around our forecast for 0.3% growth are now more balanced (previously risks were to the downside). In addition, the solid December report provides a good handoff for Q1 trade.
Key Takeaway: This is a solid trade report to conclude a generally soft Q4. The narrower deficit was welcome news, but the sharp pullback in oil prices suggests we'll see a wider gap in the coming months with the weaker C$ providing a bit of offset. We'll see if the December activity data reflect the improvement in trade activity.