Energy, metals and consumer goods lead gains
Exports rose 2.1 per cent in January as healthy increases in shipments to the U.S. were seen across a broad array of export sectors. Energy exports shot up 6.7 per cent because of 9.5 per cent increase in crude oil and a 28-per-cent gain in electricity exports.
Metals also had an unusually strong month rising 10.5 per cent, as copper and precious metals exports chalked up increases of 8.3 per cent and 36.2 per cent respectively. This explains the unusual 27.6-per-cent increase in exports to the United Kingdom as 63 per cent of exports to Britain are gold. But the biggest surprise in January was a 3.5-per-cent gain in exports of consumer goods mainly to the U.S. Despite gloom over the fiscal cliff and a major hit to personal income caused by a 2-per-cent increase in payroll taxes, U.S. consumers continued to spend at a torrid pace. Canadian exports of clothing rose 2 per cent, furniture was up 1.4 per cent, while exports of food and beverages increased by a whopping 5.8 per cent. Interestingly, Canada’s exports of alcoholic beverages rose by a stunning 25.2 per cent, the biggest increase in 17 years, so maybe the Americans are feeling a little blue. Another sign of strength in the U.S. economy was in Canada’s exports of electronic equipment and parts which reversed 7 months of declines to leap ahead by 6.9 per cent. The industrial machinery sector was flat overall, but digging into the numbers revealed significant bright spots. Construction machinery and equipment rose by 18.2 per cent, while commercial and service industry machinery jumped up by 17.9 per cent as U.S. business investment continues its astonishing growth with corporate profits at an all-time high.The forestry sector also performed well in January as the improving U.S. housing market drove building materials to a healthy 3.1-per-cent gain. And there is more good news ahead as EDC is forecasting 1.05 million housing starts this year, a 34-per-cent rise, and lumber prices are up 40 per cent over the past year due to surging demand. The most significant decline was in automotive exports which fell by 7.6 per cent after a similar decline in December. However, U.S. auto sales rose 3.7 per cent in February to 15.4 million (at annualized rates), so these declines will reverse in the coming months. As we look ahead, the leading indicators and particularly strong retail sales in February all point to very strong trade performance next month, but we will be closely watching the numbers in March to see if the sequestration cuts will have a major impact on trade. Our sense is that there should not be a large impact on trade because even if they do subtract 0.5 per cent from U.S. GDP growth, the effects will be almost entirely in the government sector. Canadian exporters are actually doing business with the private sector, where continued strength in business investment, consumer spending and a now recovering housing market will drive a very strong 2013.
This report is reprinted with permission from EDC. It 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.