August 18, 2008
Economy at a Glance - August 19, 2008
Canada’s trade surplus stayed strong in May – three major influences on exports
Canada’s foreign trade surplus in goods stayed strong at $66.4 billion annualized in May 2008, according to the latest numbers from Statistics Canada. Export growth (+5.4%) month to month was well ahead of imports (+3.9%). The three major influences on Canada’s exports through 2007 to date are set out below. In most instances, there are real volume changes as well as some large price adjustments (e.g., for the world price of oil).
(1) U.S. dependence on Canadian energy production in the areas of oil, natural gas and, to a lesser extent, electricity. The dollar value of Canadian exports of energy products through May of this year (mainly to the U.S.) are +36.0% versus the first five months of last year. Included here are five major sub-categories, all showing significant gains year to date. The first four of these are shipped primarily to the U.S.: crude petroleum (+54.2%); natural gas (+16.1%); petroleum (and coal) products (+33.2%); and electricity (+20.2%). The fifth, coal (+28.9%), is being sold to steelmakers in Japan and South Korea.
(2) Weaker U.S. demand for some key Canadian manufactured goods, primarily in the forestry and auto sectors.The higher-valued Canadian dollar has been a factor, but so has the slowdown in the U.S. economy. U.S. demand for lumber and sawmill products has plummeted due to the housing collapse. U.S. auto demand (which is partly satisfied by product made in Canada) is undergoing a downsizing and transformation as a result of $4.00 per-gallon gasoline and lower consumer confidence. Year-to-date passenger car exports are -18.6%, which pales in comparison with the figure for “trucks”, -54.3%.
(3) Strong raw material exports, mainly to emerging and established nations in Asia. For example, iron ore shipments are up dramatically (+30.5% year to date), mainly to China for use in steelmaking. Also with a dramatic increase in overseas shipments is fertilizers and fertilizer materials (+39.8%), due to the worldwide burst in demand for agricultural products. Further evidence of this is the 80.3% increase in the value of wheat exports.
For more articles by Alex Carrick on the Canadian and U.S. economies, visit his blog and Market Insights.
Canada’s Foreign Trade: The Merchandise Trade Balance – May 2008
Data source: Statistics Canada (based on seasonally adjusted current dollar monthly figures).
Chart: Reed Construction Data - CanaData.
