Trade Balance Update, October 5, 2023

Canada’s merchandise trade balance moved from a deficit of $437 million in July to a surplus of $718 million in August according to numbers just released by Statistics Canada.¹ The gain comes as imports grew, but exports rose more quickly.

Strongest Exports Increase Since 2021

Exports increased by 5.7% in August, the strongest percentage increase since October of 2021. This is attributable in part to higher prices, as the real or volume term increase was only 3%. Gains were made in 7 of 11 categories, but unwrought gold and crude was responsible for nearly all gains.

Imports Rebound from Previous Decline

Canadian imports rose by 3.8% in August after tumbling 5.4% a month prior. Again, inflated prices were a factor, with real term import increases totalling only 1.2%.

Imports of industrial machinery, equipment and parts rose 7.5% after falling 5.5% in July.

Chemical products imports were up significantly (11.2%) after four consecutive monthly declines.

Surplus with US, Deficit with Rest of World Both Widen

Canada’s trade deficit with countries other than the US widened to $9.7 billion in August, up from $8.6 billion in July. Exports to countries other than the US were up 7.7%, while imports climbed 9.8%. The increase in imports followed a 12.6% decrease a month prior.

Meanwhile, Canada’s trade surplus with the US widened from $8.2 billion to $10.4 billion, the highest such surplus since June 2022’s record high.

Strong energy prices helped our exports to the US increase 5.2%, while imports inched up 0.6%.

Industry Breakdown

Farm, fishing and intermediate food products

Exports $4.55 billion, down 1.6% month over month

Imports $2.4 billion, up 7.4% month over month

Basic and industrial chemical, plastic and rubber products

Exports $3.6 billion, up 1.8% (m/m)

Imports $4.76 billion, up 11.2% (m/m)

Forestry products and building and packaging materials

Exports $4.08 billion, up 4.1% (m/m)

Imports $2.74 billion, up 2.6% (m/m)

Industrial machinery, equipment and parts

Exports $4.2 billion, up 1.6% (m/m)

Imports $7.76 billion, up 7.5% (m/m)

Electronic and electrical equipment and parts

Exports $2.91 billion, up 2.5% (m/m)

Imports $7.04 billion, up 3.7% (m/m)

Consumer goods

Exports $7.38 billion, down 0.9% (m/m)

Imports $12.16, up 2.2% (m/m)

Industry Analysis

Storage Market Soft

“The market for storage is fairly soft at the moment,” says Canadian Alliance Terminal Director of Finance Michelle Maas.² “Across the board, our clientele groups are watching everything they’re doing very carefully.”

Maas believes that economic uncertainty is causing this cautionary approach.

While interest rates continue to pressure inventory levels to stay low, the price of oil is also becoming a significant factor.

“When the price is over $2/L, the effects begin to be seen everywhere,” says Maas.

Despite this, Maas remains optimistic about the near future, with Thanksgiving and Christmas on the horizon.

“We tend to see activity ramp up during the fall, through to Christmas, followed by a slowdown in spring and a bounce back in summer,” she says.

Lower Priced Groceries Moving More Quickly

Consumers have been feeling the economic pinch at the grocery store and Maas has noticed the impact that it’s had on food manufacturers, with less expensive items moving more quickly than pricier goods.

“Dry goods are moving off the shelves more quickly than high end specialty items,” she notes. “As consumers look to control their grocery budgets, they may not be buying a lot of truffle oil.”

In response to the inflated cost of groceries, the Prime Minister has threatened to hit grocery giants with tax measures,³ but Maas remains skeptical.

“I don’t know that the government can regulate how much money grocery stores make,” she says. “I don’t think there’s a lot of meat to that claim.”

US Auto Workers Strike

With US auto workers striking, there are concerns that Canada’s industry could be impacted.⁴ Maas believes that the effect on storage and logistics in Western Canada will be minimal.

“The auto industry in BC is not as strong as it is in Ontario, so it doesn’t impact us as much, unless you happen to be looking to buy a vehicle.”