EconoFACTS

December 07, 2021 | 09:11

Cdn. Merchandise Trade Balance (Oct.) — Autos Drive Activity

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 surplus widened to $2.1 bln in October, from a downwardly revised $1.4 bln surplus in the prior month (was initially reported at $1.9 bln). Through the first ten months of 2021, we've seen eight months in the black, putting the full year on course for the first surplus since 2014. For October, exports climbed 6.4%, with rising prices providing a big lift. Autos were the strongest sector, bouncing 30.8% as supply chain constraints eased somewhat. Energy (which hit a record high), metals (raw metals/minerals also hit a record), agriculture and electronics were strong as well. Meantime, imports rose 5.3%, with autos also leading the way, surging 27.2%. Raw metals (+31.1%) and energy (+14.9%) were the other sectors seeing a big increase.

Note that Statscan highlighted in The Daily that the November trade figures, which we'll get next month, will likely be impacted by the B.C. floods.

On a volume basis, October exports rose 2.3%, while imports jumped 6.2%. While that's just the first month of the quarter, it suggests that net exports will subtract from GDP growth in Q4. But, there's still lots of data to churn through and the trade figures are prone to chunky revisions.

On a related note, the service trade deficit narrowed modestly to $562 mln in October from $758 mln in the prior month. Exports rose a bit more than imports shrinking the gap. However, the services trade balance is expected to deteriorate when travel eventually returns to normal.

Key Takeaway: Broader trade activity surged in October, with exports and imports moving sharply higher. That's fully consistent Statscan's strong estimate for October GDP. Unfortunately, the devastating floods in B.C. will likely weigh heavily on November trade and activity, but this report adds to the evidence that the economy had strong momentum to start Q4.

Table 1 - Canada — Merchandise Trade

(C$ billions)

Source: BMO Economics, Haver Analytics