Monthly trade report – July 2024

Highlights

• After a strong performance in June, Canada’s exports of goods and services decreased 0.3% in July while imports fell 1.2%.
• Goods exports dropped 0.4%, driven mainly by decreased exports of motor vehicles and parts (-5.4%). Service exports were unchanged with increased commercial service exports offset by drops in transportation and travel services.
• Goods imports fell 1.7%, largely due to motor vehicle and parts. The decline follows record high imports of motor vehicles in June. Service imports grew by 0.6% on higher travel services.
• Goods exports to the U.S. grew in July, while imports saw a decrease. In contrast, exports to other countries fell, mainly to the United Kingdom, while imports increased, led by Switzerland and the United Kingdom.
• Excluding price effects, the volume of goods exports fell by 1.5%, and imports decreased 2.0% in July.

Data: Statistics Canada Tables 12-10-0011-01 and 12-10-0144-01. Balance of payments basis, seasonally adjusted.

Industry view - exports

Export decreases were observed in 6 out of 11 product sectors. Aircraft declined most sharply (-6.1%), while motor vehicles and parts accounted for the most overall declines (-$419 million). Exports of passenger cars and light trucks fell to its lowest level since November 2022, mainly due to a decrease in Canadian production and a similar slowdown of production in the U.S. after a recent surge.

Meanwhile, exports of farm, fishing, and intermediate food products decreased 3.9% in July. Exports of canola fell 25.6% as the result of lower prices and higher domestic processing of canola oil that is used heavily in the renewable energy industry.

Export decreases were seen in 2 out of 4 service sectors in July to end up essentially unchanged from June. Higher commercial service exports (0.8%) were almost entirely offset by decreases in both transportation services (-3.0%) and travel services (-0.8%).

Data: Statistics Canada Tables 12-10-0163-01 and 12-10-0144-01. Balance of payments basis, seasonally adjusted.

Industry view - imports

Imports fell in 6 out of 11 product sectors and increased in 2 out of 4 service sectors.

The overall decrease was mainly driven by motor vehicles and parts, which posted a $1.4 billion. Imports of passenger cars and light trucks fell by 18.7% in July after a record high in June. This was due to the end of a U.S. production and delivery recovering in the first half of 2024, as well as software outages at dealerships, floods in the southern U.S., and seasonal shutdowns at plants in the U.S.

Increased imports of metal and non-metallic mineral products (10.1%), somewhat offset the overall decrease with higher imports of copper from Sweden.

Imports of services were up 0.6% in July with travel services increasing by 3.4% due to higher spending by Canadians travelling to the U.S. On the other hand, imports of transportation services decreased by 3.0% mainly due to lower payments for maritime transportation.

Data: Statistics Canada Tables 12-10-0163-01 and 12-10-0144-01. Balance of payments basis, seasonally adjusted.

Global markets

Goods exports to the United States increased 1.9% in July while imports fell 3.3%. This resulted in Canada’s trade surplus with the U.S. growing from $9.0 billion in June to $11.3 billion in July, the largest surplus since October 2023.

After a 14.9% increase in June, exports to other countries fell by 7.8% in July, with notable exceptions being China and the European Union. This decrease was largely due to lower exports to the United Kingdom (unwrought gold), India (crude oil, copper ores, and coal), and Hong Kong (crude oil).

Meanwhile, imports from countries other than the U.S. increased 0.9% in July. Elevated imports from Switzerland (various products), and the United Kingdom (gasoline) were partially balanced by lower imports from China (various products) and South Korea (passenger cars and light trucks).

As a result of these changes, Canada’s trade deficit with countries other than the U.S. grew from $9.2 billion in June to $10.6 billion in July.

Data: Statistics Canada Table 12-10-0011-01. Balance of payments basis, seasonally adjusted.

Prices and volumes

The drop in the monthly value of goods exports was driven by a 1.5% decline in volumes, as prices rose 1.1%. The significant drop in the value of motor vehicles and parts exports was due to a notable decline in volumes (-5.4%) as prices held steady (-0.1%).

The decline in monthly value of goods imports were also driven by volumes (-2.0%) as prices rose 0.3%. Once again, the fall in the value of motor vehicles and parts imports was driven by volumes (-11.1%) as prices rose 0.3%.

The monthly average value of the Canadian dollar stayed steady in July at 72.93 US cents. However, this remains lower than the levels experienced in the beginning of the year.

The monthly price of Western Canada Select crude oil ticked up slightly in July to $US89.92 per barrel which supported growth in the value of energy products exports despite lower exported volumes.

Data: Statistics Canada Table 12-10-0168-01. Balance of payments basis, seasonally adjusted.

What to watch

• A prolonged stoppage at Canada’s two dominant railway companies was averted last month, after a large-scale labour disruption ended after one day, on August 22. Together, the two railways transport, on average, $1.1 billion in goods every day.
• On August 26, the Government of Canada announced the imposition of a 100% tariff on the imports of Chinese-made electrical vehicles, effective October 1, after similar announcements by the U.S. and the European Union. Additionally, the government also announced a 25% surtax on imports of steel and aluminum products from China, effective October 15.
• Canada’s real GDP grew by 2.1% (annualized) in the second quarter of 2024 due to higher government expenditures, business investment, and household spending on services. Growth was partially offset by declines in exports, residential construction, and household spending on goods.
• Canada’s year-over-year headline inflation moderated further to 2.5% in July after another slowdown in June. With price pressures easing, the Bank of Canada announced another 25-basis point cut to the policy rate on September 4, bringing it down to 4.25%. The next interest rate announcement will take place on October 23.