Trade Balance Update and Analysis Feb 7

Canada posted a narrow international merchandise trade deficit of $160M in December of 2022, according to numbers released by Statistics Canada.¹Exports decreased by 1.2% while imports were down 1.3%. The deficit is small enough to fall within the typical bounds for monthly revisions. This follows a slightly wider deficit of $219M in November.

Exports Down as Energy Prices Slumped

Exports were down 1.2%, falling to $63B, the lowest level since February 2022. 7 of 11 categories were down, with energy products representing the largest component of the decrease.

A major factor was the temporary closure of a pipeline in the US that carries Canadian crude oil. This caused a spike in Canadian reserves and, thus, a fall in prices. In all, energy products exports were down 7.6% to $14.3B, the lowest monthly level recorded in 2022.

Exports of farm, fishing, and intermediate food products was down 9.9% in December after three months of gains. Despite the dip, the category was up 21.% in the fourth quarter.

Exports of motor vehicles and parts were up 21% in December, following two monthly declines.

Exports excluding energy products were up 0.8%.

Imports Down as Vaccine Imports Slow

Imports were down 1.3% in December to $63.1B, the lowest level since March of 2022.

Consumer goods accounted for the largest portion of this decrease. Imports in the category were down 6.4%, a third straight monthly decrease. A 19.8% dip in Covid vaccine imports was a large factor.

Motor vehicles and parts products saw imports fall 6% to $9.9B, erasing two months of gains. Imports of energy products, meanwhile, were up 7.9%. High diesel prices were a factor here.

Trade Deficit with Countries Other than US Narrows

Canada’s trade deficit with countries other than the US narrowed from $7.3B to $7.1B in December.

Imports from counties other than the US dipped 3.8%, a second straight decline. Imports from the US were up 0.2%.

Exports to countries other than the US were down 4.5%, while exports to the US were down 0.1%.

Annual Surplus

Despite the narrow trade deficit in December, Canada posted a trade surplus of $20.1B in 2022, up from the $4.6B surplus seen in 2021. These follow six consecutive annual trade deficits experienced from 2015 to 2020.

Potential Recession Impacting Grocery Procurement?

“Some of our customers in the grocery chain are a bit concerned about how the recession will impact sales,” says Canadian Alliance President William McKinnon.²

“They’re getting to be a little bit cautious in their procurement of product, particularly products that come from overseas.”

While McKinnon understands that a recession will be painful for many, he knows that it presents opportunity for others.

“There are always winners and losers,” he says. “There are definitely opportunities in a downturn economy to strike hard and get aggressive. Market share can be gained at the expense of others who live in a world of depression.”

Punitive Policies from Grocery Giants

McKinnon has observed increasingly punitive actions being taken by grocery chains toward suppliers. Those who fail to meet quantity and time specifications are being punished, even in the case of minor discrepancies.

“I think the whole issue of grocery stores fining everybody for being one minute late or for not having this or that is very punitive,” he says.

McKinnon believes that a paradigm shift would be tricky to implement, given the power of the grocery chains.

“Who’s going to stand up against the bully?” he wonders. “The only way to beat it would be for an association to take a stand on behalf of their members. Who’s that association and what do they actually do? I don’t know. Somebody has to do it though.”

Systems Offer Accuracy, Transparency

Canadian Alliance is committed to helping their customers overcome challenges posed by stringent clients as well as complex supply chains. To this end they’ve invested in new customer facing software, portals, and trackers.

“We recognize how important timely, accurate information is to our customers,” says McKinnon. The new systems provide real time information on stock as it enters, moves throughout, and exits the facility. “This helps our customers know what availability they have for stock allocations.”

The technology is resilient, allowing it to expand or connect with systems used by others. CA has offered strong customer support throughout the transition. McKinnon says that he’s experienced very little pushback and that clients are excited to utilize the new functionality.

“I would say that, generally, customers are very keen to be able to move data into our system quickly instead of having a logjam surrounding what I would call manual process intervention,” says McKinnon.