Economists are turning optimistic about Canada's outlook, pointing to strong U.S. demand and a weaker Canadian dollar
OTTAWA—The country kicked off the year with a third-straight monthly trade surplus—the first time that has happened since 2014—due in large part to stronger sales in motor vehicles and from the agri-food sector, Statistics Canada said March 7.
Canada’s merchandise trade balance with the world widened to $807 million in January, as exports increased 0.5 per cent to hit a record $46.5 billion, the agency said.
Peter Hall, chief economist with Export Development Canada, said the 0.5 per cent increase for January on its own was decent. But when viewed in the context of the solid growth the economy has seen in recent months, he called it “great news.”
“The auto sector is blockbuster in the United States, so the sales levels are about as high as they ever get,” Hall said when asked about what has been going right for Canada.
On top of motor-vehicle exports, which saw a gain of 7.7 per cent in January, Hall also underlined recent strength in sales of farm, fishing and food products.
The agri-food industry saw a 12.8 per cent gain, including a 38.4 per cent boost in canola exports to China. Statistics Canada said canola sales to China have more than doubled since October after the two countries agreed to end a lingering dispute over exports of the crop by 2020.
Hall said the overall agri-food sector holds a lot of promise for Canada.
“It’s just on a surge,” he said. “We honestly believe that there is more from where this comes from.”
The Statistics Canada report said the January trade gains were offset in part by decreases in the exports of consumer goods as well as metal and non-metallic mineral products. In all, there were declines in six out of 11 categories.
In January, Canada’s exports to the United States rose 2.3 per cent, while imports from its neighbour increased 0.3 per cent.
As a result, Canada’s trade surplus with the U.S. grew from $3.8 billion in December to $4.5 billion in January.
TD economist Dina Ignjatovic wrote in a research note to clients Tuesday that strong U.S. demand combined with a weaker Canadian dollar should be a good sign for the sale of Canadian-made goods this year.
“Of course, the potential for protectionist measures to be implemented south of the border presents some downside risk to this outlook,” Ignjatovic wrote.
The new U.S. administration has expressed concerns about American trade deficits with its trading partners.
Hall said even though Canada has a trade surplus with the U.S., he doesn’t expect the figure to create much concern in the White House.
“If it was a yawning gap I would sure be a whole lot more worried about it,” Hall said.
“The U.S. really seems to be looking at the deficits—the much greater deficits—with Mexico and China.”
Overall imports to Canada, the report said, decreased in January by 0.3 per cent.
The decline was due to a drop in imports of metal and non-metallic mineral products, industrial machinery, equipment and parts, but was offset in part by an increase in imports of motor vehicles and parts.
Statistics Canada also released a revision Tuesday showing that December’s trade surplus was only about half as strong as a previous estimate. The figure was lowered to $447 million, down from the $923-million reading released a month ago.