Trade Balance Update and Analysis November 3, 2022

Canada’s international merchandise trade surplus rose to $1.1 billion in September, approximately doubling the $550 million surplus experienced a month earlier, per new numbers from Statscan.¹Exports rose 1.3%, while imports increased by 0.4%.

Canadian Dollar Drops

Worth noting is that the Canadian dollar dropped 2.3 US cents in September, the largest monthly decrease since March 2020. Many of Canada’s import and export transactions are completed in US dollars, so the relative decline in value of Canada’s dollar inflates the value of our transactions. Expressed in US dollars, exports decreased 1.7% in September, as imports decreased 2.5%.

Exports Up After Two Monthly Decreases

Canada’s total exports rose 1.3% in September to $66.4 billion. This follows two consecutive monthly decreases. Exports rose 1.7% in real or volume terms.

Exports of farm, fishing, and intermediate food products rose 16.7%. Wheat exports were up 65.2%, continuing their wild roller coaster ride.

Energy exports were up 1.9% following two months of strong declines.

Exports of metal ores and non metallic minerals were down 11.4%, while forestry products and building materials also decreased, by 4.9%.

Vaccines Contribute to Bump in Imports

Total imports increased 0.4% in September, reaching $65.2 billion, although they declined 0.8% in real or volume terms.

Consumer goods imports were up 3.7% on the month. Imports of pharmaceutical products spiked 22.7% as new and updated Covid-19 vaccines became prevalent.

Imports of industrial machinery, equipment, and parts rose 4.1%, reaching a record high of $7.7 billion. Wind farm projects in Alberta imported turbines and generator equipment, elevating this total.

Total imports would have been higher if not for a 16.7% drop in the import of energy products. This was largely the result of lower imports of crude oil and crude bitumen as maintenance work took place at some Canadian refineries.

Surplus with US Shrinks, with World Grows

Canada’s trade surplus with the US condensed to $9.8 billion in September, the lowest such surplus of the 2022 calendar year. Exports to the US fell 0.4% on the month, while imports from our southern neighbor rose 0.4%.

Canada’s merchandise trade deficit with countries other than the US, meanwhile, narrowed from $9.6 billion to $8.7 billion.

Exports to countries other than the US increased 7% in September. Canada saw gains in the export of gold and crude oil to the UK, pulse crops, potash and gains to China and gold and crude oil to Hong Kong.

Imports from countries other than US rose by 0.5%, with higher imports of industrial machinery from Italy, and metal ores, iron, and steel from Brazil standing out.

Grocery Store Gouging?

Grocery stores have come under fire for allegedly profiteering during this period of high inflation. Loblaw’s recent announcement of a temporary price freeze on their ‘No Name’ house brand products was dismissed by some as simply a PR move.

“I think that the grocery chains are going to make as much money as they can make,” says CA President William McKinnon. “If they freeze prices on some products, they’ll get their margins from other products. These are for-profit enterprises. They’re not going to give millions of dollars back to anybody.” ²

Supply Chain’s New Normal?

Many media reports have celebrated the supply chain’s supposed recovery from the tumult that has plagued it in recent years. McKinnon credits this, in part, to a decrease in wild supply and demand fluctuations. He also believes that the supply chain has simply become adept at navigating a greater degree of chaos.

“Organizations have adjusted to the new reality of sourcing,” says McKinnon. “What we consider dysfunctionality has now become the norm. It’s sort of like trying on a new pair of shoes. It takes a while to break them in, but eventually you get comfortable with them.”

Canada’s Place in an Electric World

As the world slowly transitions from fossil fuels toward alternate sources of energy, Canada’s natural resources place us in a favorable position. Many of the minerals needed for electric vehicle batteries are abundant in our country, but what remains to be seen is the degree to which we go beyond providing staples and into R&D and tech.

McKinnon believes that the government support is in place, but isn’t sure that we have the expertise to compete globally.

“We have a shortfall in what I call talented smart labour in Canada,” he says. While McKinnon thinks immigration could help, he sees roadblocks here as well.

“The biggest impediment to more robust immigration is the high cost of housing in our major centers. I think it’s going to be a big challenge.”

Is Labour Our Black Swan Event?

Low water levels in the Mississippi River threatening US shipping routes is just one example of a potential supply chain headache making headlines. Asked whether the Port of Vancouver is well positioned to market itself as a stable alternative, McKinnon is unconvinced.

“I don’t know if anybody has a competitive advantage,” he says.

“It doesn’t seem to me that I have read any articles where any particular jurisdiction is doing anything unique to promote business.”

As McKinnon points out, the Port of Vancouver is not without its own challenges. “The threat of labour disruption has always been a part of our DNA here on the West Coast,” he says.