Canada posted a trade surplus of $2.6B in January according to numbers released on March 8 by Statistics Canada.1 The surplus continues a trend that was interrupted by a single month trade deficit in December. In January a modest 0.2% decline in exports was more than offset by a sharp 7.4% decline in imports, following three months of import growth.
Imports Down In Most Categories
Imports fell in 10 of 11 product sections. Motor vehicle and parts imports deceased 13.9% in January, following a 6.8 increase the previous month. Passenger car and light trucks imports were down 12.4%, while engines and parts imports fell 15.4%. Statistics Canada cited ‘supply issues’ as a factor. It should be noted that the Ambassador Bridge blockade, which impacted the transportation of goods through a key trade route, didn’t begin until Feb 7.2
Further contributing to the decline in imports was electronic and electrical equipment (-9%). Communication and audio and video equipment, which includes smart phones, fell 27.6%. Disruptions in the global supply chain have been blamed for wild fluctuations in this category.
Imports of metal and non-metallic mineral products decreased 11.8%, energy products fell 12.2%, and consumer goods declined by 4.5%.
Despite the steep drop, imports remain up by 8% year over year.
Exports Buoyed by Rising Costs
Exports were down 0.2% to $56.6B. While there was a 4.6% drop in real (volume) terms, this was largely offset by an increase in prices. After an 11.8% decline in energy exports in December, the category saw an 8.7% increase in January. In fact, if not for energy exports rise, overall exports would have been down 2.7%.
Exports of motor vehicles and parts fell by 9.6%. (Again, Statistics Canada cites ‘supply issues’) Aircraft and transportation equipment exports decreased by 25.8%.
Trade Surplus with US
Exports to the United States were up by 1.2% in January, while imports dropped 4.7%. This created a $9.3B surplus in trade with our neighbor to the south, the largest since July 2008.
Exports to countries other than the US were down 4.6% for the month, while imports declined 11.8%. This led to a trade deficit of $6.7B with countries other than the US for January, down from an $8.6B deficit in December.
Supply Chain Price Increases
Supply chain struggles have led to price increases, often pitting supplier against retailer. One recent case found snack food giant Frito Lay at odds with Loblaws.
“The grocery retailers have held the hammer for a long time, but there’s a shift now,” says CA President William McKinnon. The source of the conflict was Frito Lay’s attempt to pass along price increases. “The buying group at Loblaws said we’re not paying it, and Frito Lay said fine, go somewhere else,” explains McKinnon. “I love the stance they’re taking. Everybody wants to make a fair and reasonable rate of return on investment.”
Ikea Canada’s Electric Investment
Some companies are considering converting their truck fleet to electric in an effort to reduce the carbon footprint of their supply chain operation. McKinnon believes that there are limitations to the impact that electric delivery vehicles can have in today’s supply chain.
“You want to be able to scale your equipment to match the driving time that’s appropriate for the new legislations in place for compliance,” says McKinnon. “Anything less than that doesn’t work, so long haul trucking, where they’ll typically run ten hours, isn’t a fit, as today’s electric vehicles aren’t capable of making these trips without recharge.”
He sees more potential in urban centres. “I think within a metro centre there’s more potential for uptake, depending on how quickly batteries can be charged.”
In the absence of electric vehicles, McKinnon looks for other improvements to move the needle.
“I think that refinements in fuel, more fuel efficient engines, and aerodynamic vehicles could help,” he says.
Repercussions of Bridge Blockade
Another major issue impacting the supply chain this past month was the blocking of the Ambassador Bridge, which had severe economic consequences for Canadian industry. Although the blockade has been cleared, McKinnon believes the consequences will reverberate into the future.
“I think that whatever extra costs were incurred will be passed on to consumers in the cost of goods that were delayed,” says McKinnon. “Secondly, I expect that all the transportation companies that lost revenue will need to recover those revenues through price increases over time. Thirdly, I believe that the border delays will have a real impact on driver retention. I think it’s really devastating, and it’s very disconcerting to me that that happened.”
McKinnon believes that labour shortages in the trucking industry will ultimately need to be overcome with increased compensation, the price of which will be passed along to consumers.
“The salaries aren’t large enough to sustain the relative risk of being in that industry,” he says. “I think those numbers need to move up. To what level? I don’t know. I think the greatest challenge that all companies are going to face over the next five to ten years is labour.”