Canada: Trade deficit improved in January from all-time high - NBF

Data released today showed that Canada’s trade deficit narrowed in January from a record of CAD 4.82 billion to CAD 4.25 billion. National Bank of Canada’s analyst Jocelyn Paquet point out the trade balance improved in January as exports rose for first time in 6 months.

Key Quotes:

“Canada’s trade deficit narrowed in January as nominal exports expanded for the first time since July. True, much of the improvement resulted from a steep increase in the price of crude oil exports (+36.5%) but other categories also showed decent progressions as evidenced by a 1.2% rise in ex-energy exports. Imports, meanwhile, were inflated by the delivery of several airliners from the United States, a fact that also explains why Canada’s trade surplus with its southern neighbour shrank for the sixth consecutive month despite a rise in crude oil shipments.”

“Without the aircraft category, imports would have been flat and the trade deficit would have come down a lot more.”

“Looking at the data in real terms, imports advanced at a faster pace than exports, as volumes in the energy segment actually fell (keep in mind that production cuts came into effect in January in Alberta). This should translate into yet another negative contribution to GDP from trade in January.”

“In the coming months, we expect the trade balance to continue to improve, benefiting from rising energy prices; the 60% spike in benchmark oil prices in Canada since the beginning of the year should translate into better terms of trade and higher nominal exports.”