The latest trade numbers for Canada and the U.S. send potentially troubling signals about both economies, where demand appears to be softening.
Canada’s trade surplus for February came in much weaker than analysts had projected, as exports slid. The merchandise advantage for February was only $292-million, which compares unfavourably with a revised January figure of $1.95-billion. The culprits were resources and vehicles, which contributed heavily to a slide in exports of 3.5 per cent. Energy shipments fell 6.9 per cent and autos plunged nearly 12 per cent, after several months of impressive gains.
Imports rose a mere 0.2 per cent. Notably, machinery and equipment imports continue to fall, a sign of slower business investment in domestic production.
Exports to the U.S. fell 3.8 per cent, which is not surprising when energy and auto shipments are involved.
The U.S. trade deficit narrowed to $46-billion (U.S.), a 12 per cent improvement. The better than expected results stemmed mainly from sharply slowing imports, most notably from China. Crude oil deliveries by volume dropped by more than 17 per cent. Total imports from all countries fell 2.7 per cent. A narrower deficit is typically good news for the economy, which led some analysts to hike their projections for GDP growth. But it would be better if rising exports did the heavy lifting. In the U.S. case, exports rose by only 0.1 per cent.
The lower U.S. energy imports may well be part of a longer-term trend, as the United States continues to develop its domestic resources, thanks to new shale technology, and reduce its dependence on foreign supplies. That, needless to say, is not good news for Canada’s trade outlook, particularly if lower U.S. demand for oil and natural gas is accompanied by a slowing Chinese economy. The latter seems inevitable if U.S. and European demand for Chinese goods continues to weaken.