Rising oil prices and robust demand for lumber by U.S. homebuilders helped boost Canada’s export of goods by 1.5 per cent in December.
At the same time, merchandise imports fell 2.3 per cent, bringing the country’s merchandise trade deficit with the rest of the world to $1.7-billion, the narrowest since June, Statistics Canada reported on Friday.
Canadian exports have been steadily increasing since April but remain below prepandemic levels. The rise in oil prices – which finished the year at slightly less than US$50 a barrel for benchmark West Texas Intermediate crude – helped boost energy exports 10.2 per cent in December, compared with the previous month, to $7.5-billion. However, energy sales are still down year over year, with crude oil exports in December $1.9-billion lower than in December, 2019.
All told, Canada exported $47.3-billion worth of goods in December, with six of 11 product categories showing an increase. Aircraft and other transportation equipment exports were up 8.2 per cent, thanks largely to business-jet sales. Lumber and other forestry products exports rose 5 per cent because of unseasonably strong demand for new-home construction.
“There’s this irrepressible housing market in the United States right now, they’re spiking at levels of building that we haven’t seen since late 2005,” said Peter Hall, chief economist with Export Development Canada. “That’s what is really goosing up the forestry sector for Canada.”
Canadian agriculture and base metals exports continue to perform well, owing in large part to a strong economic rebound in China. Exports to China were up 12.9 per cent in December, compared with the previous month. While total exports of metal ores dropped 4.5 per cent in December compared with November, metal ore exports are up 14.1 per cent year-over-year, which is the third-largest increase after agriculture and forestry products.
“While we were still dealing with an [economic] chasm, China had popped out of it. And China is now growing from that base, so they’ve got a voracious appetite for base metals because their production machine is doing extremely well,” Mr. Hall said.
Canadian canola exports, which mainly end up in China, were down month-over-month in December. But Mr. Hall said he is watching for a significant jump in January owing to soaring prices.
Canola exports fell sharply in 2019, when Chinese authorities blocked shipments by two of Canada’s biggest grain exporters. But over the past year, Canadian farmers have found workarounds.
“Instead of crushing the canola here and shipping it to China, there has been crushing that has happened in other countries, which have then shipped to China,” Mr. Hall said.
The 2.3-per-cent drop in merchandise imports was driven by an 8-per-cent decline in imports of consumer goods. The biggest decline was in clothing, footwear and textile products, which fell 21.5 per cent in December.
Imports regained their prepandemic levels by October, but then edged lower in November and December.
“The persistent decline in imports since November is a signal of weak domestic demand,” Toronto-Dominion Bank economist Omar Abdelrahman wrote in a note to clients.
Mr. Abdelrahman also warned that the strength in the headline export and trade deficit numbers “masks underlying weaknesses and softening momentum” in the Canadian economy and that “the near-term outlook for the first quarter of 2021 continues to rest on shaky grounds.”
Canada’s exports of services declined 1.9 per cent in December to $9.2-billion, while imports of services were down 0.8 per cent to $9.4-billion. Service-sector trade remains well below prepandemic levels, largely because of continuing travel restrictions.
“On an annual basis, exports of services declined 18 per cent to $114.3-billion in 2020, the lowest level since 2015,” Statistics Canada noted.
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