Canada’s international merchandise trade deficit narrowed to $987 million in July, according to numbers just released by Statistics Canada.1 The deficit, down from a revised $4.9 billion a month earlier, comes as imports decreased 5.4% (m/m) and exports increased 0.7% (m/m).
Exports Inch Up Slightly
Canada’s exports totalled $60.4 billion in July, up 0.7% from June, but still down 9.2% from last July. Exports were actually down 0.2% in July (month/month) in real or volume terms.
Imports Down Considerably
Canada’s merchandise trade imports totalled $61.4 billion, down 5.4% from June (down 4.3% in real or volume terms). The total is also down 5.2% year over year. The B.C. Port strike is considered a factor in this contraction.
Trade with Countries Other than the US Rebounds Slightly
Canada’s trade deficit with countries other than the US was $8.4 billion in July, which actually represents a rebound from the record deficit of $11.4 experienced a month earlier. Canada’s trade surplus with the U.S. totalled $7.4 billion, up from $6.4 billion in June.
Industry Breakdown
Farm, fishing and intermediate food products
Exports $4.62 billion, up 9.7% month over month
Imports $2.23 billion, down 2.7% month over month
Basic and industrial chemical, plastic and rubber products
Exports $3.53 billion, up 7.6% (m/m)
Imports $4.26 billion, down 7.7% (m/m)
Forestry products and building and packaging materials
Exports $3.91 billion, up 1.6% (m/m)
Imports $2.66 billion, down 4.2% (m/m)
Industrial machinery, equipment and parts
Exports $4.14 billion, up 1.4% (m/m)
Imports $7.16 billion, down 6.1% (m/m)
Electronic and electrical equipment and parts
Exports $2.83 billion, up 0.9% (m/m)
Imports $6.78 billion, down 6.4% (m/m)
Consumer goods
Exports $7.49 billion, down 0.3% (m/m)
Imports $11.85, down 4.9% (m/m)
Industry Analysis
Interest Rates Impacting Inventory Levels
“I think the big issue on our customers’ minds today is interest rates,” says Canadian Alliance Terminals (CAT) President William McKinnon.2 The dual threat of high interest rates and potential recession have some companies wary about the cost of carrying inventory.
“When interest rates were low, money was cheap,” continues McKinnon. “Now that interest rates are higher, they’re not getting the price increases that they want to cover the cost of inventory. It could be an interesting collision course.”
Port Strike Chaos in Rear View Mirror
While the impact of this summer’s port strike can be seen in the most recent numbers, McKinnon believes that there has now been a return to business as usual.
“It seems that the backlog is starting to flush out and the shipping schedules are getting back into alignment,” he says.
With boats unable to be unloaded, clients were becoming frustrated with inaccessible inventory. McKinnon notes that the return to normalcy is a timely one.
“It’s good news that shipping schedules are getting back into sync, as the last quarter is typically the strongest,” he says.
Tech Integration Won’t Wait
“We are on a quest with all of our clients to be integrated, transparent, and seamless,” says McKinnon.
CAT has been undergoing technological upgrades in order to eliminate data entry redundancies.
“We have to be as service-efficient as possible,” he explains. “If we’ve got ten people doing a function and we can improve processes, we’ve got to do that, because nobody wants to pay additional costs.”
Not only do the technological improvements help contain expenses, they provide customers with convenience and clarity as well. McKinnon has observed reluctance on the part of some clients to embrace new processes, but he says that the transition is much simpler than many fear.
“Clients always say to me ‘we should have done this years ago’,” he says.
Cited Sources
1 Government of Canada, Statistics Canada. “Canadian International Merchandise Trade, July 2023.” The Daily – , September 6, 2023. https://www150.statcan.gc.ca/n1/daily-quotidien/230906/dq230906a-eng.htm.
2 Direct communication with CAT President William McKinnon