November 03, 2022 | 09:29
Merchandise Trade Surplus Widens in September
Canada's merchandise trade surplus widened to $1.1 bln in September from $0.55 bln (revised down from $1.5 bln, due to higher imports) in August. This is the country’s ninth straight month in surplus, its best run since 2008—however, the magnitude of the surpluses has shrunk notably as energy prices have stepped down from recent peaks.
The loonie’s depreciation was a notable story this month as the currency posted its biggest monthly drop since the beginning of the pandemic vs. the US dollar (in average monthly terms). That contributed to the 1.3% gain in exports, led by farm fishing and intermediate food (+17%), thanks to a rebound in wheat production. Energy exports rose 1.9%, largely on higher volumes of crude oil and natural gas. Meantime, imports edged up 0.4%, led by a 23% jump in pharmaceutical products, mostly in COVID vaccines.
On a volumes basis, exports rose 1.7% while imports fell 0.8%. For the third quarter, exports rose 14% a.r., while imports declined 3% a.r., indicating that trade will add strongly to GDP growth when we get the official release later this month.
In a separate release, the service trade deficit narrowed from $1.8 bln to $1.6 bln in September.
Key Takeaway: Canada posted its ninth straight merchandise trade surplus in September, with a depreciating loonie providing a lift to exports. Unfortunately, the latter also adds to domestic inflation pressures, which will keep the BoC on alert. While softening commodity prices have weighed on nominal flows in recent months, trade volumes look to add to growth in the third quarter.