Canada returns to trade deficit position in March as imports surge

Julie Gordon
Updated ·2 min read
The ship Anna Maersk is docked at Roberts Bank port carrying 69 containers of mostly paper and plastic waste returned by the Philippines

By Julie Gordon

OTTAWA (Reuters) -Canada's trade balance shifted back to a deficit in March following two consecutive months of surplus as imports jumped significantly while exports edged up slightly, Statistics Canada said on Tuesday.

Canada's trade deficit with the world was C$1.1 billion ($892.21 million) in March. Analysts polled by Reuters had predicted a surplus of C$700 million after a revised C$1.42 surplus in February.

Imports rose 5.5% to their highest level since May 2019, driven by energy imports, though all 11 sectors posted increases, Statistics Canada said. Exports edged up 0.3%, mostly on motor vehicles and parts, offset by falling energy exports.

Much of the shift in energy imports and exports was due to a rebalancing from February, when power outages in Texas crippled the U.S. oil and gas industry leading to a surge in Canadian energy exports to that country.

"We had some pretty big movements last time around and these are offsetting movements," said Peter Hall, chief economist at Export Development Canada.

Hall noted that the broad gain in imports indicates that Canada's industrial machine is gearing up for a surge of demand from the United States, where a large stimulus package is bolstering consumer spending.

"This is arming ourselves for stronger growth, that's what the import surge seems to be indicating here. The exports will follow, but there is a bit of lag here," Hall said.

Exports to the United States fell 3.8% in March, while imports rose 5.2%. Canada's trade surplus with the United States, its largest trading partner, narrowed in March to C$4.3 billion.

Looking forward, economists expect choppy trade numbers in April as fresh restrictions to curb a harsh third wave of COVID-19 weigh.

"April will likely be pretty volatile given the restrictions, but higher commodity prices should provide ongoing support to Canada's trade balance," Benjamin Reitzes, Canadian Rates & Macro Strategist at BMO Economics, said in a note.

The Canadian dollar was trading 0.2% lower at 1.2306 to the greenback, or 81.26 U.S. cents.

Canada's economy is expected to expand 6.5% in 2021, after shrinking 5.4% in 2020 amid the coronavirus pandemic, according to Bank of Canada estimates.

($1 = 1.2329 Canadian dollars)

(Reporting by Julie Gordon; additiona reporting by Steve Scherer in Ottawa and Fergal Smith in Toronto; Editing by Andrew Heavens, Will Dunham and Kirsten Donovan)