Merchandise Trade

EXPORTS JUMP IN MAY, BUT THE LEVEL OF ACTIVITY REMAINS DEPRESSED

Canadian merchandise exports rose 6.7 per cent to $34.6 billion in May, while imports slid a further 3.9 per cent to $35.3 billion. The increase in exports was largely attributable to the resumption of production in the auto industry and higher crude oil prices. Statistics Canada blamed the fall in imports on supply challenges as economies around the world gradually reopened. After removing the effect of prices, export volumes were up 3.8 per cent and import volumes were down 6.6 per cent.

As expected, exports showed signs of life in May, and further gains are in the cards in the coming months. However, the declines in March and April were so steep that it will take many months for Canadian exports to return to their pre-crisis levels. The trade outlook also remains extraordinarily uncertain, as a successful recovery largely depends on Canada and its major trading partners keeping COVID-19 in check.

TRADE DEFICIT NARROWS TO $700 MILLION

The combination of rising exports and falling imports pushed the trade deficit down from $4.3 billion in April to $700 million in May. Canada’s trade surplus with the US widened from $1.2 billion to $2.8 billion, while Canada’s trade deficit with the rest of the world narrowed from $5.5 billion to $3.5 billion. The last time Canada’s trade deficit with countries other than the US was this small was in December 2016.

AUTO INDUSTRY RESTART HEADLINES EXPORT INCREASE

The increase in exports was relatively broad-based, spanning 8 of 11 commodity groups. Motor vehicles and parts exports jumped $822.3 million, in line with the auto industry restart. However, despite this monthly gain, exports of motor vehicles and parts were still 77.0 per cent below their year-ago levels.

Exports of energy products rose $534.0 million, thanks largely to higher crude oil prices but also to higher volumes. However, as noted by Statistics Canada, the monthly value for crude oil exports in May was still about one-third of what it was in January.

Consumer goods exports increased $493.8 million, led by a large increase in meat products. Some meat processing plants reopened in May after temporarily closing in April due to COVID-19 outbreaks. At the same time, exports of farm, fishing and intermediate food products increased by $320.0 million to reach a record $3.9 billion. As noted by Statistics Canada, the large gain in May coincided with an increase of availability in the rail system due to lower shipping demand for other products.

On the negative side, exports were down in metal ores and non-metallic minerals (-$231.6 million), metal and non-metallic mineral products (-$169.0 million), and chemical, plastic and rubber products (-$48.6 million).

EXPORTS TO THE UNITED STATES JUMP NEARLY $2 BILLION

Exports to the US rose $1.9 billion in May, though this still pales in comparison to the unprecedented $11.8 billion drop in April. Accordingly, despite this 8.9 per cent increase, exports to the US were still down 40.0 per cent on a year-over-year basis.

Exports to countries other than the US climbed 2.4 per cent in May, thanks largely to higher exports to China, which were up $349.5 million. At the same time, exports to the EU (excluding the UK), South Korea, and Mexico increased by $109.7 million, $38.8 million, and $11.4 million, respectively. These gains more than offset lower exports to Japan (-$88.2 million) and to the UK (-$24.9 million).