In February, Canada’s exports declined 5.4%, surpassing the 2.6% fall in imports, widening the trade deficit to USD 1.9 billion in the month from January’s USD 628 million. Prices were mainly responsible for the pullback in February; however, volumes of both exports and imports also dropped last month by 2.2% and 1.4%, respectively.
The drop in exports was due to consumer goods and energy products that dropped around 14%. Decline in falling prices was the major reason for decline in energy product exports, as volumes declined below 4%. The huge amount recorded in January was reversed by the decline in consumer goods exports in February.
Energy sector was also responsible for the decline in imports. Imports dropped 30% to the lowest level since September 2003. Meanwhile, imports volume declined 21% as eastern refineries have boosted their domestic oil consumption.
Canada’s exports to the US declined 5.6%, whereas imports dropped 2.7% in February. This narrowed Canada’s trade surplus with the US, its biggest trading partner. Meanwhile, its exports to the rest of the nations declined 4.8%, whereas imports dropped 2.4%.
Canada’s exports dropped from a record high, but continued to be quite elevated, noted TD Economics. Admittedly, considerable amount of gains in export volumes registered in recent months, along with import volumes’ underperformance, implies that net trade will positively contribute to first quarter’s overall growth, according to TD Economics.
“Even with the softer trade data for February, growth for the first quarter is tracking above our forecast for 2.9%”, added TD Economics.
Export sector of Canada is likely to remain as an important source of strength in the near future as the CAD is likely to hover in the mid-70 US cent range in the rest of 2016. However, on the down side, Canada’s imports are likely to continue performing poorly due to lower CAD and weak domestic demand, said TD Economics.
