By Robb M. Stewart
OTTAWA–Canada’s merchandise-trade surplus with the rest of the world sharply narrowed in February with a drop in exports and imports following strong rises in the first month of the year.
The country posted a goods-trade surplus of 422 million Canadian dollars, the equivalent of about US$313.9 million, Statistics Canada said Wednesday. That was well below the C$1.7 billion surplus expected, according to economists at TD Securities.
January’s surplus was revised down by about C$716 million, to C$1.20 billion.
After increasing 3.5% in January, exports fell 2.4%, to C$65.03 billion, month-over-month, while imports declined 1.3%, to C$64.61 billion, after rising by 3.6% the month before, the data agency said.
On a volume, or price-adjusted, basis, exports were down 0.9% in February while imports slipped 0.8%.
Private-sector economists widely expect Canada will slip into a shallow recession this year, though industry-level economic growth recovered in January and early indications suggest a further modest advance in February.
Stephen Brown, deputy chief North America economist at Capital Economics, said exports are still on track to rise this quarter decline the drop in February, though survey’s point to further weakness in the second quarter of the year.
All product segments monitored by Statistics Canada showed export declines in February, other than farm, fishing and intermediate food which logged a fifth monthly increase in the last six months.
Exports of metal and non-metallic mineral products were lower for the month, with exports of unwrought gold, silver and platinum group metals falling after surge in exports in January. Exports of motor vehicles and parts were also lower after reaching the higher level since May 2019, and exports of aircraft and other transportation equipment and parts were down sharply to the lowest value since April 2022.
Imports of industrial machinery, equipment and parts were down in February, following a record high the month before, and imports of motor vehicles and parts fell after a strong rise in January. Still, imports of consumer goods advanced in February, with a jump in imports of pharmaceutical products.
Exports to the U.S., Canada’s biggest export market by a wide margin, dropped 0.9% while imports from the U.S. were 2.8% lower. That widened Canada’s surplus with its neighbor to C$9.29 billion from C$8.56 billion the month before.
Exports to countries other than the U.S. declined 7.2% in February, the agency said. On the imports side, purchases from abroad rose 1.3%.
When international trade in goods and international trade in services were combined, Canadian exports decreased 2.2%, while imports fell 1.0%. As a result, Canada’s trade deficit–incorporating both goods and services–narrowed to C$766 million from C$1.8 billion in January.
Most economists expect the Bank of Canada will leave its benchmark interest rate unchanged next week, when it is also set to release its latest projections for inflation and economic growth. The central bank, which aggressively lifted its key rate to a 15-year high then held it steady in March, in its last report released in January forecast inflation would fall to about 3% in the middle of this year and reach its 2% target next year as economic growth stalled through the middle of 2023 before picking up again.
Gross domestic product, a broad measure of goods and services produced across the economy, rose 0.5% in January from the month before after edging down 0.1% in the final month of 2022. Statistics Canada’s advance estimates point to a 0.3% rise in GDP for February.
Write to Robb M. Stewart at [email protected]
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