The Conference Board of Canada’s Senior Economist Doris Chu offered insights on the merchandise trade data for May.
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“Canada’s merchandise trade sector turned in another positive performance in May as both export and imports recorded increases. Although the May numbers were encouraging, rising uncertainty concerning greater protectionism and a host of other challenges are expected to limit its growth prospects over the course of the year. Consequently, Canada’s trade sector is not expected to contribute to economic growth in 2019.â€
For the third consecutive month, Canada’s merchandise exports recorded another increase, rising by 4.6 per cent in May. The monthly gain was widespread, driven in large part by higher exports of motor vehicle and parts. Following shutdowns in April, Canadian motor vehicle production bounced back sharply in May. Higher exports of aircraft and mineral fuel products were also big contributors to the monthly increase.
Merchandise imports were also up in May, increasing by 1.0 per cent. Higher imports of aircraft (from the United Sates and Europe) and motor vehicle parts (bolstered by the rebound in production) led the monthly increase.
Given the robust increase in exports, Canada's merchandise trade balance climbed to a $762 million surplus position in May.
Exports to the Untied States rose by 3.7 per cent in May, while imports were down by 0.5 per cent. Accordingly, Canada trade surplus with the United States increased from $4.4 billion in April to $5.9 million in May—the largest surplus recorded since October 2008.
Canada’s trade deficit with countries other than the United States also improved as exports increased by 7.3 per cent. This resulted in the deficit shrinking from $5.5 billion in April to $5.2 billion in May. The improvement was led by higher exports of copper and coal to Japan, metal ores to South Korea and energy products to the Netherlands. At the same time, imports from countries other than the United States increased by 3.7 per cent, with higher imports of crude oil from Saudi Arabia and Norway.
In volume terms, merchandise exports increased by 4.0 per cent for the month, while imports were up by a more modest 1.2 per cent. Hence, net trade made a solid positive contribution to real GDP growth in May.
Despite May’s upbeat numbers, escalating tensions on the global trade front, uncertainty surrounding greater protectionism, and a host of other challenges are expected to limit growth prospects for both exports and imports for the remainder of the year.
Hence, a low competitive Canadian dollar and respectable U.S. demand will not be enough to allow the trade sector to make a positive contribution to real GDP growth this year. ■