BY PETER HALL, EDC
Canadian exports edged down by 0.1 per cent in August as a 0.7 per cent increase in export volumes was offset by falling prices. Because of a sharp 3.1 per cent decrease in imports, Canada’s overall balance of merchandise trade fell to $1.3 billion.
This year’s bumper grain crop pushed agricultural exports to a 6.5 per cent gain, driven by wheat which surged by a (seasonally adjusted) 57.45 per cent and other cereals which grew by 46.4 per cent. The energy sector also charged ahead as petroleum exports reversed 6 months of declines to surge by 9.1 per cent. The forestry sector had a healthy month with exports rising 2.1 per cent, due to robust sales of pulp and other wood products.
However, these impressive increases were overshadowed by a 6.1 per cent fall in exports of industrial goods and materials as iron ore exports tumbled 26.8 per cent, copper fell 24.5 per cent, and fertilizers declined 22.3 per cent. The automotive sector also decreased in August, by 2.3 per cent, on soft demand for trucks, but U.S. auto sales have been very strong so far in 2012 and this trend is expected to continue thanks to easier access to consumer credit and pent-up demand.
In fact, Canada’s exports to the U.S. actually rose by 1.4 per cent in August, as the American economy gathers steam. Improving job creation, rising consumer confidence and strong corporate profits all point to an improving outlook for our southern neighbour in the months ahead. Exports to the European Union declined by 5.3 per cent because of the continental recession and nervousness about the sovereign debt crisis. Emerging market sales, which have been a source of strength for many years, actually edged down by 2.2 per cent, the third monthly decline as the BRICs have all seen slowing growth.
Looking ahead, we expect continued strength in agriculture as this year’s near-record harvest will boost export volumes through this year and into 2013, while healthy prices will also support international sales. The automotive sector should also improve markedly as U.S. auto sales reached 14.94 million annualized in September, the highest levels in 4 and a half years. Canada’s lumber industry should also prepare for growth as the U.S. housing market strengthens and housing starts continue to climb.
Next month’s trade release should be closely watched because the European Central Bank’s announcement on September 6 that it would undertake unlimited bond purchases significantly reduced concerns about a breakup of the euro. Some relief from the fear factor surrounding Europe is welcome as it coincides with a strengthening U.S. economy. A boost of confidence is just what the global economy needs to get international trade growth back on track.
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