Canada posted its smallest goods trade gap in seven months in December, as exports rebounded thanks to the return of rail and pipeline services after November interruptions.
Statistics Canada reported Wednesday that the merchandise trade deficit was $370-million in the final month of 2019, down sharply from $1.2-billion the previous month – snapping a string of five straight billion-dollar-plus shortfalls. The trade gap was the narrowest since May, when the country managed a modest surplus of $228-million.
December exports were up 1.9 per cent in value from November, outpacing imports, which grew 0.2 per cent. On a volume basis, exports were up an even stronger 2.8 per cent, while imports were up 0.2 per cent.
The biggest driver of export growth was a resurgence in oil shipments as the Keystone pipeline resumed transporting Canadian oil to U.S. markets after a rupture shut it down in November. Crude oil exports surged 18 per cent in December, returning to just below October’s pre-disruption levels.
Statscan noted that exports in general bounced back in December after the Canadian National rail strike significantly slowed goods movement in November. Eight of 11 export sectors rose.
The strong finish capped a largely disappointing year amid rising international tensions and slumping global trade flows. Exports grew just 1.7 per cent in 2019, a marked slowdown from the 5-per-cent-plus growth in each of the two previous years.
Fraying relations with China were a significant part of that story, as the Chinese government blocked Canadian canola and meat shipments in apparent retaliation for the arrest in Vancouver of Meng Wanzhou, a top executive of Chinese telecommunications giant Huawei Technologies Co. Ltd. Canadian exports to China slumped 16 per cent in 2019 – more than $4.6-billion.
The December figures also wrapped up a weak fourth quarter during which the Canadian economy showed increasing wear from the global trade slowdown. Exports fell 2 per cent in volume terms, their second straight quarterly decline, while import volumes were down 0.6 per cent.
“Underlying trends still look lacklustre,” Royal Bank of Canada senior economist Nathan Janzen said in a research note.
Economists said the weakness in both exports and imports was a key factor in the economy’s overall sluggishness in the final quarter. The economic indicators to date suggest little to no growth in the quarter, down from a 1.3-per-cent annualized pace in the third quarter.
They also noted that weak imports of industrial machinery and equipment – down 4 per cent in December and 3.9 per cent for the quarter – are a worrisome sign, evidence of a deterioration in investment in new goods-producing capacity.
Many economists believe the worst of the global trade slump may be behind us, as U.S.-China trade tensions have eased and the new North American trade pact nears ratification. However, they caution that issues have emerged that could contribute to an uncertain trade environment in the first quarter, in particular the coronavirus outbreak in China and the subsequent downturn in oil prices.
“The coronavirus outbreak may weigh on foreign demand in the near term. While Canada’s trade exposure to China is not significant, some sectors, including agriculture and base metals, may face disproportionate demand impacts if the slowdown in China persists. Nominal exports are also likely to fall behind given the recent drop in commodity prices,” said Toronto-Dominion Bank economist Omar Abdelrahman in a research note.
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