Canada: International Merchandise Trade, July 2017

Canada’s merchandise trade deficit totalled $3.0 billion in July, narrowing from a $3.8 billion deficit in June. Imports fell 6.0% and exports decreased 4.9%, both due mainly to the effect of widespread price decreases, while the Canadian dollar appreciated sharply relative to the American dollar in July.

Widespread declines in imports in July

Total imports fell 6.0% in July to $47.2 billion, following seven consecutive monthly increases, with declines observed in all commodity sections. Prices were largely responsible for this decrease, falling 3.8%. This occurred as the Canadian dollar gained 3.6 cents US relative to the American dollar from June to July.

The decrease in import values was partially attributable to aircraft and other transportation equipment and parts, as well as motor vehicles and parts. Year over year, imports rose 4.0%.

Following a record observed in June, imports of aircraft and other transportation equipment and parts fell 35.2% to $1.6 billion in July. Aircraft imports led this decrease, with a slowdown in imports of airliners in July after two months of strong growth.

Imports of motor vehicles and parts also contributed to the decline, down 4.4% to $9.1 billion. Imports of motor vehicle engines and motor vehicle parts (-13.0%) were responsible for the decrease in July, as planned closures in the automotive manufacturing industry were longer this year. Overall, prices in the section declined 2.6% and volumes decreased 1.8%.

Lower export values mainly due to prices

After posting a 5.0% decline in June, total exports fell 4.9% in July to $44.1 billion, with decreases observed in 9 of 11 sections. Prices decreased 3.9%, while volumes were down 1.1%. Motor vehicles and parts, as well as aircraft and other transportation equipment and parts contributed the most to the decline. In July, exports excluding energy products were down 5.2%. Year over year, total exports were up 2.2%.

Exports of motor vehicles and parts fell 9.6% to $7.4 billion in July, the strongest decrease since August 2014. Exports of passenger cars and light trucks (-12.6%) were mostly responsible for the decline. As was the case with imports of motor vehicle engines and motor vehicle parts, longer planned closures in the automotive manufacturing industry in July were behind the decrease. Overall, prices were down 4.5% and volumes decreased by 5.4%.

Exports of aircraft and other transportation equipment and parts were down 18.3% in July to $1.8 billion, following four consecutive monthly increases. Exports of aircraft led the decline, falling 23.9% due to lower exports to the United States.

Decline in imports from the United States

Imports from the United States decreased 6.7% to $30.4 billion in July, led by lower aircraft imports. Exports to the United States were down 3.2% to $33.3 billion, mainly on lower exports of passenger cars and light trucks. As a result, Canada’s trade surplus with the United States widened from $1.8 billion in June to $2.9 billion in July.

Exports to countries other than the United States declined 10.0% in July to $10.8 billion, with the United Kingdom (unwrought gold), Japan (copper, canola and seafood) and Saudi Arabia (personal transportation equipment) posting the largest decreases. Imports from countries other than the United States were down 4.7% to $16.8 billion in July, with Brazil (bauxite) and Mexico (motor vehicle parts) contributing the most to this decrease. Consequently, Canada’s trade deficit with countries other than the United States rose from $5.6 billion in June to $5.9 billion in July.

Real trade deficit narrows in July

In real (or volume) terms, imports decreased 2.3% and exports were down 1.1% in July. Consequently, Canada’s trade deficit in real terms narrowed from $891 million in June to $338 million in July.

Revisions to exports and imports

Revisions reflected initial estimates being updated with or replaced by administrative and survey data as they became available, as well as amendments made for late documentation of high-value transactions. Exports in June, originally reported as $46.5 billion in last month’s release, were revised to $46.4 billion in the current month’s release. However, exports in May, originally reported as $48.6 billion in June’s release, were revised to $48.9 billion on revisions applied to energy prices. June imports, originally reported as $50.1 billion in last month’s release, were revised to $50.2 billion.

StatsCanada

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell