Canadian goods trade deficit widens in March, net trade likely to weigh on Q1 GDP growth

Canadian goods trade deficit broadened to CAD 4.1 billion in March. Imports grew 6 percent in the month, driven up by motor vehicle and parts and consumer goods. A broad-based rise was recorded in exports, led by aircraft and other transportation equipment. Exports, in real or volume terms, grew 3 percent while imports rose 5.3 percent.

After two straight months of rises, the import value of motor vehicle and parts has now more than made up the slightly unexpected fall in January. The solid rise in consumer goods imports in March was widespread throughout major product categories, with imports of clothing, footwear and textile products up a strong 16.2 percent.

The export value of aircraft and other transportation equipment has risen by over 20 percent for two straight months now. This greatly showed a tripling of sales of boats and other personal transportation equipment to Saudi Arabia in March. Moreover, sales of aircraft engines and parts to the U.S. were up 15.2 percent in the month.

Canada’s merchandise trade surplus with the U.S. narrowed for the fifth straight month, dropping to CAD 1.7 billion, as higher oil exports were countered by larger imports or motor vehicles. Canada’s trade deficit with the remainder of the world broadened to CAD 5.8 billion, as imports rose 11.5 percent while exports rose 11.4 percent. Markedly, imports from China rose 26.6 percent in the month, greatly reflecting imports of computers and computer peripheral equipment and communications equipment.

In spite of a solid rebound in export volumes in the past two months of the quarter, the softness at the beginning of the year is enough to result in exports dropping by around 0.4 percent in the March quarter.

“With import growth of 5.1 percent (annualized) significantly outpacing export growth in the quarter, net trade is likely to be a material drag on first quarter Canadian economic growth”, stated TD Economics in a research report.

At 15:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was highly bearish at -104.715, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 112.681. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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