EconoFACTS

April 07, 2021 | 08:58

Cdn. Merchandise Trade Balance (Feb.) — Back to Back in the Black

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 balance stayed in surplus for a second straight month (the first back-to-back months in the black since late 2016) coming in at $1 bln for February, narrowing modestly from a downwardly revised $1.2 bln in the prior month (initially reported at $1.4 bln). The details of the report were generally soft. Exports fell 2.7%, with big declines in metals and aerospace. Recall that a one-time sale of used airplanes provided a big lift to January exports. Strength in energy (+18.3%) provided some offset, as higher prices boosted crude shipments, and natural gas surged (best in 7 years) amid extreme weather in parts of the U.S. The only other sectors to record growth in the month were agriculture and chemicals/plastic/rubber. Imports dropped 2.4%, with most sectors lower as well. Note that autos were weak on both the export and import side as chip shortages weigh on the industry.

On a volume basis, February exports slumped 5%, while imports slid 3%. However, it still looks like trade will add to GDP growth in the quarter thanks to a solid handoff.

On a related note, the service trade balance stayed around flat with a small $79 mln surplus. Until travel resumes look for this to stay close to balance. Note that the combined goods & services balance came in at a $1.1 bln surplus in February, just a snick larger than the prior month's $1 bln reading. Barring some big-time revisions, it looks as though Canada will record a current account surplus in Q1 for the first time since 2008Q3.

Key Takeaway: Despite generally weaker activity, the trade balance stayed in surplus, suggesting we'll see the first quarterly current account surplus in over a decade. While there's plenty of volatility in the trade data, the strength in energy prices should continue to provide solid support to Canada's trade balance.

Table 1 - Canada — Merchandise Trade

(C$ billions)

Source: BMO Economics, Haver Analytics