Merchandise Trade Analysis - April 2017

Exports continue to build momentum in 2017

April was another good month on the international trade front as widespread gains once again drove Canadian exports to new monthly highs. Building on a strong March in which exports grew by (a revised) 3.2 per cent, foreign sales expanded by another 1.8 per cent in April to reach $47.7 billion.

April's gains were driven by a combination of price and volume effects. Exporters not only sold more goods in foreign markets, but also received better prices for their products. Export volumes rose by 1.1 per cent compared to March, while prices were, on average, 0.7 per cent higher.

Meanwhile, imports into Canada were also higher in April, increasing by a comparatively modest 0.3 per cent. Import volumes actually fell slightly compared to March, but while physical deliveries were down, Canadians paid higher prices for imported goods.

The difference between export and import growth was enough to cut Canada's monthly trade deficit by about two thirds - falling from (a revised) $936 million in March to $370 million in April.

A poor first half of the year in 2016, combined with strong export growth since last fall, has transformed the exporting sector from a drag on the Canadian economy to a growth driver. Not only are exports tracking well above last year's levels so far through 2017, but the gap between the two years is widening with every passing month. From January through April, exports are 8.4 per cent higher compared to the first four months of 2016 and April's exports are 14.7 per cent higher than they were 12 months ago.

April's export gains were fairly widespread, with eight of the eleven broad product categories posting gains. Led by copper ores and potash, the largest increase was in exports of metals ores and minerals which were up 10.2 per cent compared to March. There were also solid gains in forest products (4.7 per cent) and motor vehicles and parts (4.4 per cent).

The only notable weaknesses were in agriculture and food products as well as metal products. A drop in exports of livestock and canola drove agricultural export down, while lower deliveries of precious metal and nickel alloys had the same impact on the broader metal products category.

Unlike the story in March, most of Canada's export gains in April were the result of increased sales in the United States offsetting losses in other major export destinations. While Canada's overall exports rose by $864 million in April, exports to the US were more than $1.8 billion higher - a 5.4 per cent increase over the previous month. There were also notable increases in exports to several smaller destinations: Saudi Arabia, Algeria and Singapore.

Those gains were partially offset by a significant decline in exports to the European Union and China. Exports to the EU dropped by $560 million in April (14.4 per cent), with the UK accounting for close to 40 per cent of that decrease. Meanwhile, China-bound exports fell by $181 million (8.1 per cent). Sales to both Mexico and Germany were down significantly as well.

On the import side, growth was largely driven by consumer products (up 3.7 per cent), as well as electronic and electrical equipment (up 4.6 per cent), and chemicals (8.0 per cent). Those gains were offset in part by lower imports of energy products (down 14.0 per cent) and aerospace equipment (down 24.5 per cent). As with exports, most import growth in April came from increased purchases from the United States, although there was also a surge in imports from Turkey, Norway and Switzerland that month.


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