Economics
Merchandise trade surplus expands
Latest available: May 2008
Release date: July 11, 2008
Canada merchandise trade surplus grew to $5.5 billion in May from a downwardly revised $4.8 billion in April (originally reported as $5.1 billion). Expectations had been that some of April's outsized increase in imports would be reversed and that the surplus would increase slightly to $5.3 billion. Imports, however, increased by a hefty 3.9%, while exports rose by an even-stronger 5.4%.
The increase in exports partly reflected an 8.1% surge in energy product sales due to higher volumes and prices, with coal shipments to Asia posting a notable increase. Exports of industrial goods (mainly metal ores) also posted a solid gain, while agricultural and fishing product sales increased by 2.6%. Forestry up 3.5%; M&E up 4.1%; and consumer goods rose 5.6%.
The main offset was another monthly decline in the automotive component, with exports falling by 3.5% in May. Statscan pointed to high gas prices and weak U.S. demand. The resolution of the labour dispute in late May did not provide the expected lift to activity.
The rise in imports largely reflected an 8.7% increase in industrial goods and materials (mainly metals). Machinery and equipment imports rose 4.6%, with aircraft, engines and parts getting a lift from commercial and military fleet rejuvenation. Energy product imports dipped by 3.1%.
The trade picture on a volumes basis showed another deterioration in May, with the deficit rising to $5.7 billion (in 2002 constant dollars) from a deficit of $5.1 billion as imports growth of 4.3% outpaced exports growth of 3.2%.
The deterioration in net exports on a volumes basis in April-May was not surprising given the unexpected improvement in the first quarter. The strength in the Canadian dollar and weakness in the U.S. economy will keep pressure on the net export balance, meaning that this sector will likely act as a drag on growth for the remainder of this year. Domestic demand, conversely, is expected to be relatively firm, buoyed by Canada's favourable terms of trade bolstering import demand.
