September 06, 2023 | 09:07
A Strike-ing Improvement in Trade
Canada's merchandise trade deficit narrowed to $1.0 bln in July from $4.9 bln (revised from $3.7 bln) in June. The B.C. port strike weighed on trade activity in July, and is expected to continue to have an impact in the coming months as the backlog clears.
Exports rose 0.7%, as shipments of aircraft and canola roughly doubled in the month. The latter was notable as operations at B.C. grain terminals were unaffected by the strike. Imports fell 5.4%, weighed by a 60% drop in unwrought gold from high levels in the previous two months. Imports from countries other than the U.S. fell 13%, the most since 2016, amid the strike.
On a volume basis, exports edged up a smaller 0.2% while imports fell 4.9%. For now, it looks like trade will add to growth to start the third quarter, though we expect some giveback in the coming months.
Separately, the services trade deficit widened to $1.4 bln in July from $1.1 bln in the previous month. In total, Canada’s overall trade deficit improved to $2.4 bln in July from $6 bln in June.
In another release, Canada’s labour productivity fell for the fifth straight quarter, down 0.6% in Q2. And, growth in unit labour costs accelerated to 2.1%. The deterioration in productivity, especially when compared against U.S. gains, remains a long-term challenge for Canadian competitiveness.
Key Takeaway: Canada’s merchandise trade deficit improved in July amid a number of distortions from the B.C. port strike. This release is normally subject to big revisions, and there will likely be some retracement in the next report; but for now, it looks like trade in volume terms added to growth to start off the third quarter.