Monthly Trade Report – April 2021
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Goods exports (-1.0%) and goods imports (-4.7%) declined in April 2021. Both declines were largely attributable to production shutdowns in the auto manufacturing sector due to a shortage of semiconductor chips.
Services exports also decreased 2.2% in April. The lone increase in the month came from a 2.2% boost in services imports, driven by an increase in commercial services. However, both services exports and services imports remain far below pre-pandemic levels.
Goods and services combined, exports fell 1.2% while imports decreased 3.6%. Canada posted a small trade surplus with the world of $368 million, up from the $1.2 billion deficit posted in March.
The decrease in trade is more pronounced when price effects are removed. The volume of goods imported fell by 6,8% while the volume of goods exported decreased 3,5% in April. Large positive price effects helped mitigate these losses.
Data: Statistics Canada Tables 12-10-0011-01 and 12-10-0144-01. Balance of payments basis, seasonally adjusted.
Imports of motor vehicles and parts decreased 22.1% in April to $6.6 billion. Apart from the trough experienced at the start of the pandemic, this is the lowest level since February 2012. The imports of passenger cars and light trucks, as well as engines and parts, both fell sharply as production in North America and abroad had to be curtailed or halted due to a semiconductor chip shortage. Imports of metal & non-metallic minerals (-18.8%) fell mostly in "other metal ores and concentrates" and copper ores.
Exports of motor vehicles and parts decreased 18.1% to $5.5 billion due to the semiconductor shortage which likely persisted into May. Apart from the pandemic, this is the lowest export level of these products since January 2014. Offsetting part of the decrease in autos, exports of consumer goods increased, driven by prepared and packaged seafood products which more than tripled in April. The snow crab season opened a month earlier to reduce the risk for the endangered right whales, leading to a significant increase of crab exports in April. Opening a month earlier could lead to decreases in later months.
Both the decline in services exports, and also the increase in services imports, can be almost entirely attributed to commercial services, with financial services causing most of the variation. Exports and imports of travel services were down in April as the stringent COVID-19 testing and quarantine regulations continued. Although trade in transportation services increased in April, the level is still far below pre-pandemic levels—this is entirely attributable to the decline in passenger transportation.
Data: Statistics Canada Tables 12-10-0121-01 and 12-10-0144-01. Balance of payments basis, seasonally adjusted.
Imports from the United States decreased 5.2% in April, largely due to the decrease in motor vehicles and parts. Despite the decrease in autos exports as well, overall exports to the United States actually increased 1.4%, largely due to the seafood and softwood lumber. The increase in softwood lumber is partially due to the increase in lumber prices. The increase in snow crab exports earlier than usual will likely lead to subsequent decreases in seafood exports in the upcoming months. Canada’s merchandise trade surplus with the United States widened from $4.2 billion in March to $6.4 billion in April.
After increasing 12.8% in March, exports to non-U.S. countries decreased 7.2% in April, largely due to lower gold exports to Hong Kong and the United Kingdom.
Imports from non-U.S. countries decreased 3.8% in April. Following a 27.8% increase in March, imports from China decreased 18.8% in April. The decrease in imports from China was widespread across a number of product categories.
Canada’s trade deficit with non-U.S. countries increased from $5.5 billion in March to $5.8 billion in April.
Data: Statistics Canada Table 12-10-0011-01. Balance of payments basis, seasonally adjusted.
Prices and volumes
In April, the Canadian dollar appreciated 0.5 cents relative to the American dollar, breaching the 80-cent mark for the first time since January 2018. The Canadian dollar has appreciated 12.5% against the greenback since April 2020.
The decrease in trade is more pronounced when price effects are removed. The volume of goods exports decreased 3.5% while the volume of goods imports decreased 6.8%.
The price indices for both goods exports and imports were up noticeably in April, mitigating some of the decrease in volumes. The price of exports increased 2.6% while import prices increased by 2.2%. This is likely due to stronger commodity prices; lumber prices, which have increased drastically since the pandemic began, resumed their increase in April. Crude oil and crude bitumen prices were also up noticeably in April for both exports and imports.
Data: Statistics Canada Table 12-10-0128-01. Balance of payments basis, seasonally adjusted.
What to watch
- The U.S. labour market picked up steam in May, adding 560,000 jobs after a disappointing April. While this is good news for the Canadian economy, the biggest gains (292,000) came in leisure and hospitality—mostly at restaurants and bars—thus the impact on Canadian exports may be muted.
- The increase in lumber prices began in late March, but really took off at the end of April and peaked in mid-May. May exports will likely better reflect the historic lumber prices.
- Inflation in Canada spiked to 3.4% in April 2021, the fastest rate of growth since May 2011. Prices rose in every major component on a year-over-year basis, with the price of gasoline rising 62.5% in April (largest year-over-year increase on record). This widespread price increase was in large part due to a strong base-year effect as prices fell sharply during the early months of the pandemic in 2020. Consequently, inflation rates will likely remain elevated in the second quarter of this year until base-year prices return to normal levels and supply and demand reach a better balance.
- Although India seems to have passed the peak of its deadly second wave of the pandemic with partial re-openings in its major cities, the situation has worsened in many other Asian countries, especially those in Southeast Asia. As COVID-19 resurgence is widespread in the region and affected Asian countries are important suppliers in global supply chains, Canada’s trade may be impacted in the following months. Additionally, there are recent reports that Vietnam has detected a new coronavirus variant which appears to have characteristics from both the existing Indian and UK variants, making it potentially even more transmissible.
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