EconoFACTS

January 07, 2021 | 09:01

Cdn. Merchandise Trade Balance (Nov. 2020) — Golden Gain in Exports

Economist

Director, Canadian Rates & Macro Strategist
Fixed Income Strategy

Benjamin has been with the Bank of Montreal for over a decade. He is responsible for the Canadian macro-economic... (Read more)

Benjamin Reitzes

Director, Canadian Rates & Macro Strategist
Fixed Income Strategy

Benjamin has been with the Bank of Montreal for over a decade. He is responsible for the Canadian macro-economic... (Read more)

Canada's merchandise trade deficit narrowed in November to $3.3 bln from an upwardly revised $3.73 bln shortfall in the prior month (initially reported at $3.76 bln). Exports climbed 0.5%, leaving them 3.1% below February levels. Imports dipped 0.3%, staying just a snick above pre-pandemic levels. The lower level of oil prices explains a good chunk of the lagging recovery in exports. The modest rise in exports was led by a 26% surge in raw metals/minerals, while metal/mineral products jumped 11.6%, driven by shipments of gold. Indeed, exports to the U.K. jumped 50% as it tends to be the destination for a good chunk of Canada's gold production. Energy exports managed to climb 2%, but most other sectors were lower, with a notable 6.2% drop in forestry and a 5.1% decline in consumer goods. The pullback in imports was driven by an 11% drop in raw metals/minerals, and 7.8% decline in energy, though more than half the major sectors were lower. A 16% rise in aerospace imports limited the overall drop.

On a volume basis, exports climbed 0.6%, while imports slipped 0.4%. That's a small improvement after a tough start to the quarter for trade from a GDP perspective. Still, imports are up over 11% annualized so far for Q4 versus just a 6% rise for exports, suggesting that trade will act as a drag on growth. However, the magic of revisions could move those figures notably and there's still the December figures to come.

On a related note, the service trade balance stayed around flat with a small $119 mln surplus. Until travel resumes look for this to stay close to balance.

Key Takeaway: While the trade deficit narrowed, it remains notably wider than pre-pandemic levels. However, with oil prices rising meaningfully in December and through the early part of 2021 (so far), the trade gap will likely shrink over the next couple of months.

Table 1 - Canada — Merchandise Trade

(C$ billions)

Source: BMO Economics, Haver Analytics