OTTAWA — It was expected that Canada’s trade performance would wane in March, but it wasn’t expected to be this bad — a record deficit of $3.41 billion in March, in fact, as exports dropped much faster than imports.
And that might not be the worst of it, especially if our biggest and most reliable trading partner — the United States — continues to limp along with us.
Wednesday’s report from Statistics Canada showed the country’s global shortfall in the balance of trade was substantially bigger than the $1.4-billion estimated by economists, as the impact of the international collapse in oil prices continued to squeeze demand for Canada’s exports. In February, the deficit totalled $2.5 billion, and March brought no improvement.
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“What happened in December and January is we got exceptionally strong (trade) numbers — with strength right across the board in most categories,” said Benjamin Reitzes, senior economist at BMO Capital Markets. “And now, in February and March, we’ve gotten the reversal of those gains, pretty well across the board as well.”
Shipments of goods and services dropped by 4.8 per cent to $41 billion in March — the lowest by value since January 2014, with declines being led by vehicles and auto parts, as well as consumer goods, the federal data agency said. Exports of energy products declined by 4.3 per cent and non-energy shipments fell by 4.8 per cent.
Imports slipped by 2.4 per cent during the month, even though the dollar value of those goods — at $44.4 billion — was larger than exports. Canadian purchases of consumer goods were down by 4.6 per cent to $9.9 billion, while imports of aircraft, along with other transportation equipment and parts, dropped by 20.4 per cent to $1.4 billion.
“It’s tough to find a silver lining in the March trade data,” said Leslie Preston, senior economist at TD Economics, in a note to clients.
Even so, Preston anticipates that real GDP between January and March should still come in at an annualized pace of between 2.5 and three per cent. However, Preston added, that type of growth “is unlikely to be sustained in Q2.”
That’s consistent with many analysts’ forecasts for Canada, after the economy ended 2015 with overall growth of 1.2 per cent and this year could be around two per cent — depending on the impact of the federal government’s fiscal stimulus plans.
But it was the pullback in exports to the United States — the destination of three-quarters of all of our products and shipments — that’s likely the biggest concern for policymakers in Canada, considering the U.S. economy is now likely to growth by less than two per cent in 2016.
Shipments south of the border fell in March by 6.3 per cent to $30.4 billion, at the same time as imports from the U.S. declined by 4.8 per cent to $28.9 billion — pushing Canada’s trade surplus with its neighbour to $1.5 billion, the lowest level since December 1993.
“The worst is probably behinds us from an oil-shock perspective, but it’s not as if we’re growing like gangbusters here. We’re still looking a pretty modest growth,” said BMO’s Reitzes.
“What concerns me is the U.S economy. The data haven’t been great of late,” with its “overall consistently softish numbers,” Reitzes said. “If that trend continues, that certainly does not bode well for Canada.”