Exports declined by 0.95 per cent in December after a similar decline in November, capping a challenging year for Canada’s international sales.
Exports to the U.S. fell 4 per cent and shipments to the European Union also edged downwards, so the 14.4 per cent gain in exports to emerging markets was just not enough to make up for weakness elsewhere.
On the sector side, December’s sales of agricultural goods were strong, rising 6.9 per cent, as wheat and canola outperformed. Metal ores also produced a stunning 26.3 per cent rise, the biggest increase since 2008, because of surging copper shipments. However, the other sectors of Canadian exports produced either stagnation or outright declines, with the energy sector producing the largest drop of 6.9 per cent.
With the arrival of the December numbers we can now look at 2012 as a whole, and it is a very mixed picture. Canada’s merchandise exports overall grew by just 1.2 per cent in 2012, but this masks large variability within the sectors.
The best performing sector is automotive with a 14.9 per cent increase in 2012, as U.S. car sales continue to rise. The agriculture sector also boomed in 2012 with a 12.7 per cent increase in exports as strong prices combined with big volume increases.
The largest declines were in exports of metal and metal products which declined by 7 per cent in 2012, mainly because of price movements. However, one of the biggest surprises is the essentially flat growth in the Energy sector which rose just 0.7 per cent. Because of aggressive expansion of investment, the volume of petroleum exports rose by 6 per cent last year. At the same time oil prices held fairly steady with WTI averaging $94.17 in 2012 compared to $95.08 in 2011, so we would expect to see a big pick‐up in exports. However, Alberta crude which is thicker and needs more refining, typically sold for $18 less a barrel than West Texas Intermediate in previous years, but it is currently $34 a barrel cheaper. The discount was over $40 late last year, and as a result the weaker price environment offset the increased volume. Also in the energy sector, 2012 saw the spectacular success of hydraulic fracturing in the U.S., with huge supplies of cheap natural gas coming online, alongside plummeting gas prices. Canada’s exports of natural gas fell by an unprecedented 31.7 per cent.
Next year should be especially bright for the U.S., as private sector growth is accelerating despite cuts to government spending. In fact, in Q4 2012, GDP growth would have been 2.5 per cent if not for the unprecedented contraction in defence spending and the reduction in inventories. There may be even more cuts ahead as the sequestration deadline looms at the end of March. American businesses may hold off on investment until they have greater certainty, but once the U.S. gets past the political wrangling, the export outlook for 2013 brightens considerably.
This report is a compilation of publicly available information and is not intended to provide specific advice and should not be relied on as such. No action or decisions should be taken without independent research and professional advice. EDC is not liable whatsoever for any loss or damage caused by or resulting from any inaccuracies, errors or omissions in such information.