Merchandise Trade Analysis - September 2018

Trade volumes fall for the second consecutive month

Canada's two-way trade fell for the second month in a row, as both exports and imports were slightly lower in September.

Beginning with exports, Canadian sales abroad were essentially flat, falling by 0.2 percent compared to August. That decline brought the value of monthly exports down to $50.4 billion in September from $50.5 billion in August. Exports are 1.6 percent below their July peak of $51.2 billion.

Imports were also lower in September, dropping by 0.4 percent to hit $50.8 billion. Imports have fallen for three consecutive months and are down by 1.4 percent over that period. As a result, Canada posted a small trade deficit of about $135 million in September.

It was reported last month that August saw Canada registered its first trade surplus since December 2016. That surplus was revised out of existence in September as the estimated value of imports into Canada that month was increased from $50 billion to $51 billion.

Although exports were flat in September, they remain well above 2017 levels. Exports are 15.7 percent higher than they were 12 months ago, and through three quarters of the year are tracking 6.8 percent higher than they were over the same period last year.

The decrease in both imports and exports in September was the result of lower sales volumes. Export volumes. Led by energy, primary metals and consumer goods, export volumes were down by 1.3 percent compared to August. That decline was partially offset by a 0.9 percent increase in average export prices. Similarly, import volumes into Canada fell by 1.5 percent in September, while the prices of those goods rose by 0.2 percent.

In terms of export products, results were mixed. Of the eleven major product categories, two were higher, four lower, and the rest essentially unchanged. On the positive side, higher prices offset volume declines in the energy sector, driving overall export values 2.3 percent higher ($234 million). Meanwhile, exports of value-added metals and mineral products rose by 2.8 percent ($154 million).

On the negative side, there was a sharp decline in exports of consumer goods in September. Led by food and beverage products, consumer goods exports fell by 3.9 percent ($243 million). Primary metals and minerals exports were down 8.0 percent ($167 million), while exports of electrical/electronic equipment and industrial machinery were also lower.

Flat export growth in September was largely the result of lower sales to the European Union, Hong Kong and India cancelling out a spike in exports to China. Led by sharply lower shipments to Italy and Spain, EU-bound exports were down by 11.1 percent compared to August - a decline of $465 million. Meanwhile, monthly exports to Hong Kong dropped by more than half after an uncharacteristic spike over the previous 4-5 months, and sales to India fell by a third ($144 million). Meanwhile, exports to China jumped by more than 23 percent compared to August, rising by $524 million. There were also smaller increases in exports to the United States and Norway.

Looking at imports into Canada, the decline in August was driven by three product categories -aerospace products; energy; and electronics/electrical products. The decline in aerospace was largely the result of data revisions. In August's trade analysis, there was a large reported drop in aerospace imports as well. However, with the release of new data, that decline in August disappeared as major aerospace deliveries were reassigned. August's 28-percent decline in aerospace imports was revised to a 9.1 percent increase and a 28-percent decline has now been assigned to September.

Meanwhile, Canadians purchased more foreign consumer goods (up 2.8 percent, or $298 million), as well as chemicals, plastics and rubber products (up 5.1 percent, or $219 million).

As with exports, the decline in imports was driven by sharply lower trade with the European Union. Imports from the EU were down 12.4 percent compared to August ($713 million) with the biggest declines coming from outside the union's leading economies. Imports from Japan and Mexico were also lower, while Canadians purchased more goods from China and the United States.