First back-to-back trade sur­plus since fall of 2014

Gain in en­ergy prices hid some trou­bling weak­ness in non-en­ergy ex­ports, say StatsCan econ­o­mists

The Hamilton Spectator - - BUSINESS - CRAIG WONG

The coun­try posted back-to-back monthly trade sur­pluses for the first time since Septem­ber 2014, boosted by higher prices for ex­ports of oil and nat­u­ral gas in De­cem­ber, says Sta­tis­tics Canada.

But the gain in en­ergy prices hid some trou­bling weak­ness in nonen­ergy ex­ports, econ­o­mists said Tues­day.

The over­all trade sur­plus hit $923 mil­lion for the fi­nal month of 2016 af­ter a sur­plus the pre­vi­ous month that was re­vised up­ward to $1 bil­lion from an ini­tial read­ing of $526 mil­lion.

The re­sult ex­ceeded ex­pec­ta­tions, as econ­o­mists had an­tic­i­pated a sur­plus of $350 mil­lion for De­cem­ber, ac­cord­ing to Thom­son Reuters.

Jen­nifer Lee, a se­nior econ­o­mist with BMO Cap­i­tal Mar­kets, said the monthly trade fig­ures have taken on greater sig­nif­i­cance as of late.

“These days, in­ter­na­tional trade re­ports are scru­ti­nized, not just for their im­pact on GDP, but the po­lit­i­cal ram­i­fi­ca­tions as well,” Lee said in a re­search note to clients. “Run­ning sur­pluses will draw un­wanted at­ten­tion (from the U.S.).”

Trade was a key is­sue for Pres­i­dent Don­ald Trump’s cam­paign, dur­ing which he said the United States needed to take a tougher ap­proach. While Trump has fo­cused much at­ten­tion on his coun­try’s trade re­la­tion­ship with Mex­ico and China, some have raised con­cerns that Canada could face col­lat­eral dam­age in a trade dis­pute.

Canada main­tained its trade sur­plus with the U.S. in De­cem­ber, though it nar­rowed to $4.4 bil­lion from $4.7 bil­lion in Novem­ber. Ex­ports edged up 0.2 per cent to $34.2 bil­lion in De­cem­ber, while im­ports in­creased 1.3 per cent to $29.7 bil­lion.

Over­all, ex­ports in De­cem­ber gained 0.8 per cent to a record $46.4 bil­lion due to higher en­ergy prod­uct prices. En­ergy prod­uct ex­ports climbed 15.9 per cent to $8.5 bil­lion. Ex­clud­ing en­ergy prod­ucts, ex­ports fell 2.1 per cent.

Im­ports rose one per cent to $45.5 bil­lion in De­cem­ber, due in large part to im­ports of air­craft and in­dus­trial ma­chin­ery.

Lee said the over­all num­ber for the trade sur­plus was en­cour­ag­ing, but there were some trou­bling de­tails in­clud­ing weak non-en­ergy ex­ports.

“Even though it is good on the head­line, on the sur­face, it is not go­ing to change what the Bank of Canada is say­ing, which is a rate cut is still very much on the ta­ble,” Lee said.

In vol­ume terms, ex­ports fell 1.4 per cent in De­cem­ber, while im­port vol­umes gained 0.4 per cent.

CIBC econ­o­mist Nick Exarhos said the over­all trend in real ex­ports is still stuck in a range and he has con­cerns that U.S. pro­tec­tion­ist poli­cies have the po­ten­tial to slow, or even de­rail a re­cov­ery in man­u­fac­tur­ing in­vest­ment.

“Com­bined with limited up­side for en­ergy prices over the com­ing months, and the fact that there’s room for im­ports to play catch-up, we’ve likely seen the best of the bounce in the trade bal­ance for a while,” he said.

Sta­tis­tics Canada also re­ported Tues­day that mu­nic­i­pal­i­ties is­sued $7.2 bil­lion worth of build­ing per­mits in De­cem­ber, down 6.6 per cent from Novem­ber. For all of last year, the value of build­ing per­mits to­talled $84.5 bil­lion, down 0.8 per cent from 2015.

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