May 12, 2011 – Canada's trade surplus almost doubled in March from the
previous month, suggesting the pull from the global recovery was
stronger than the drag from a strong loonie.
Statistics Canada said the value of Canadian exports outpaced
imports by $627 million during March, up from a revised $356-million
surplus in February – more than 10 times bigger than the $33-million
surplus originally reported.
Trade with United States was the main reason for the March
surplus, as is usually the case, but the month-to-month improvement
was due to trade with other countries.
The trade surplus with the United States narrowed to $4.8 billion
in March from $5 billion the previous month. The trade deficit with
countries other than the U.S. declined to $4.2 billion from $4.7
billion in February.
Some of the improved trade surplus is due to the impact of the
strong loonie and rising commodity prices, but exports increased by
2.5 per cent in real terms as well in March, continuing a trend.
Canadian export volumes have now increased an impressive 12.4 per
cent annualized in the first three months of 2011, following a 16
per cent surge in the final quarter of last year.
All this in the face of a dollar that has risen to well above
parity with the U.S. currency.
"With export prices rising, and two-way trade surging, March
posted the kind of trade surplus that bulls on the Canadian economy
were hoping for,'' said Emanuella Enenajor, an economist with CIBC
The result was better than economists had expected and suggests
exporters are making inroads in foreign markets despite the
disadvantage of a loonie trading above par, said economist Benjamin
Reitzes of BMO Capital Markets.
"Overall, the rebound in international trade activity is very
encouraging after real (gross domestic product) contracted in
February,'' Reitzes said.
But even the February dip in GDP might not have been as
pronounced as first reported.
TD Bank economist Leslie Preston pointed out that the February
trade surplus was about 10 times bigger than initially reported at a
slim $33 million. In any case. February's swoon doesn't appear to
have been sustained, she said.
"In terms of first-quarter growth, I would say this
report was very good,'' she said.
"I think you see the effect of the dollar mostly in imports
because import prices declined 0.4 per cent in March,'' she added.
Export Development Canada chief economist Peter Hall said high
global demand is overcoming the loonie drag, but warns firms won't
be able to buck the impact for long.
"That's going to bite us at some period of time,'' he said.
"We're still in a period where contracts were predicated on a
weaker currency and were inked and signed, but eventually the high
dollar will come to bear on these numbers.''
The EDC predicted exports could increase by 12 per
cent this year and return to pre-recession peaks sometime in 2012,
but the estimates built in a slight devaluation in the loonie.
Trade still isn't producing the big economic growth that that's
expected to come, although it has stopped being a drag. That's
because economic activity is measured by quantity of production,
rather than the value of goods sold.
So, discounting the rise in the value of the loonie and higher
commodity prices, Canada actually had a trade deficit in March,
noted Scotiabank economist Karen Cordes Woods.
That anomaly stems from the fact that as the Canadian dollar
rises, imports become less expensive, and as commodity prices soar,
the value of commodities that Canadians export increases.
In March, export volumes rose 2.5 per cent, retracing only about
half of February's fall-off. Meanwhile, import volumes rose 3.2 per
cent, accounting for the real trade deficit.
Still, the continuing growth of exports, both in volume and value
terms, bodes well for the Canadian economy and suggests firms are
still able to sell to the rest of the world in a high-loonie
environment, for now at least.
March's export gains were led by energy products and industrial
goods and materials, while automotive products, industrial goods,
and machinery and equipment contributed to import increases.
Exports to countries other than the United States rose 7.8 per
cent, largely due to higher shipments to the European Union. During
the same period, imports grew 2.1 per cent.
Machinery and equipment imports rose 1.5 per cent to $10 billion,
led by a 16.5 per cent gain in imports of aircraft, engines and
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