Canada’s Trade Surplus Unexpectedly Narrows as Imports Surge

(Bloomberg) -- Canada’s economy recorded a surge in trade with the rest of the world in March, as rising prices for commodities coupled with strong domestic demand and a smoother global supply chain drove both imports and exports.

Imports jumped 7.7% in March to C$61.1 billion ($47.7 billion), while exports were up 6.3% to C$63.6 billion, Statistics Canada reported on Wednesday. The nation’s surplus narrowed to C$2.5 billion, from a revised C$3.1 billion in February.

Economists were anticipating the surplus would widen to C$3.9 billion in March, from C$2.7 billion initially reported in February.

Key Insights

• The surge in oil prices over the past year has helped the nation swing into recurring surpluses for the first time since 2014, though Wednesday’s report presents a mixed picture for the Canadian economy
• The data suggest that some of the bottlenecks plaguing the trade sector eased in March, at least temporarily. The surge in imports also suggests strong demand in Canada for goods -- a sign of a healthy economy
• At the same time, Canadians are turning to foreign goods to meet that demand rather than from a home economy that has been fast running up against capacity. That could weigh on growth numbers. This is reflected in trade volumes. While the export increase was largely price driven, the higher imports rose on the back of higher volumes.

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• Excluding price effects, imports were up 7% in March while exports were up just 1.1%
• For the first quarter as a whole, exports were up 5.5% in nominal terms but down 2.5% adjusting for prices. Imports were up 1.7% during the three-month period, but down 1% in constant dollars.
• Exports of energy products rose 13% in March, accounting for 28% of total shipments, driven by higher crude oil prices. But Canadian oil shipments abroad in volume terms were down
• Canada also record a sharp increase in oil imports in March, reflecting both higher prices and volumes that suggests active inventory management at the nation’s refineries

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