OTTAWA, March 12 - Canada’s merchandise trade position deteriorated in January as exports contracted more than imports, pushing the monthly deficit substantially higher, official data showed on Thursday.
Statistics Canada reported a trade deficit of C$3.65 billion for January, a marked increase from the C$1.3 billion shortfall recorded in December. Economists surveyed by Reuters had been looking for a much smaller deficit of C$900 million for the month.
The country’s trade flows remain heavily concentrated toward the United States, which continued to account for the bulk of cross-border merchandise movements. In January the U.S. represented 68% of Canada’s total exports. Both exports to and imports from the United States declined during the month, with exports to the U.S. falling 3.8% and imports from the U.S. down 3.4%.
That bilateral slowdown narrowed Canada’s goods surplus with its southern neighbor to C$5.4 billion in January, slightly below the C$5.7 billion surplus reported for December.
On the overall export side, total merchandise exports declined 4.7% in January, marking their largest monthly drop since April of last year. Exports fell across six of 11 product categories, and when measured in volume terms exports decreased 5.8%, according to Statistics Canada.
The most pronounced weakness was in motor vehicle and parts shipments, which plunged 21.2% in January to their lowest level since September 2021. Statistics Canada attributed the steep drop primarily to lower motor vehicle production in Canada resulting from prolonged seasonal production stoppages.
Another notable decline came in metal and non-metallic mineral products, which fell 8.0% in January. That decrease was led chiefly by a fall in exports of unwrought gold to the United Kingdom.
Energy exports, Canada’s largest export category by value and accounting for close to one-quarter of total exports, rose 4.1% in January. The increase in energy shipments helped offset part of the overall export decline but did not prevent the widening of the trade deficit.
Exports to countries other than the United States dropped 6.5% in January following a record high in December, with the fall mainly tied to lower unwrought gold exports to the U.K. Conversely, imports from non-U.S. markets increased 2.1% in January, a gain that Statistics Canada said reflected, in part, higher imports of industrial machinery from China.
At the aggregate level Canada’s total imports declined 1.1% in January, with seven of 11 product categories registering decreases.
Economists referenced by the agency noted that Canadian international trade could improve in the months ahead if crude oil prices remain elevated as a result of the conflict in the Middle East, which would tend to boost energy export values.
Key context and takeaways
- The monthly merchandise deficit widened to C$3.65 billion in January from C$1.3 billion in December.
- Total exports fell 4.7% and were down in six of 11 categories; export volumes declined 5.8%.
- Motor vehicle and parts exports plunged 21.2% because of extended seasonal production stoppages, while energy exports rose 4.1% and remain the largest export category by value.