Canada's trade deficit narrowed in September

Canada's trade deficit narrowed to $1.7B in September, from $2.7B in August.  Exports were up 0.7%, while imports fell 1.3% - the first decline in 5 months.  In real terms, imports were down by an even larger 2.1%, while exports rose 0.7%.

The rise in exports was driven by gains in consumer goods (+4.6%) - particularly pharmaceutical and medicinal products - energy products (+3.7%) and metal and non-metallic mineral products (+3.2%).  Higher volumes for all but energy products underpinned the increase, while prices led energy products higher.  On the flipside, motor vehicle and parts exports slid 3.7% during the month, with volumes of car and truck exports down nearly 5%.

On the import side, a 14.3% drop in metal and non-metallic mineral product imports accounted for the bulk of the decline, followed closely by a 12.1% fall in energy imports.  The declines were driven by lower import volumes.

Canada's trade surplus with the U.S. widened in September, as imports (-0.4%) fell more than exports (-0.3%).  Meanwhile, its trade deficit with the rest of the world narrowed, thanks to a 4% rise in exports and a 3.1% decline in imports.

Today's report provides the full picture for trade in the third quarter.  Relative to the second quarter, export volumes were up 2.9% while import volumes were down 0.2%.  On balance, net trade will provide a significant contribution to economic growth for the third quarter, which is tracking around 2.5%.  This is in line with the Bank of Canada's latest forecast.

"Looking ahead, September's data sets up the fourth quarter for another solid trade performance.  The shift toward export-driven growth should continue, supported by healthy demand south of the border and a Canadian dollar hovering around the 75 US cent mark.  With energy prices still in the doldrums, non-energy exports will lead the way, including exports of services which have been on the rise in recent years", says TD Economics.