Canada: Trade to subtract from growth again - NBF

According to Kyle Dahms, analyst at National Bank of Canada,  the Canadian goods trade deficit was larger than
expected by consensus in February and they signal that details are not exactly encouraging

Key Quotes:

“Canada’s merchandise trade deficit expanded to C$2.7 bn in February . The higher deficit was due to nominal imports (+1.9%) which rose at a faster pace than nominal exports (+0.4%). The energy trade surplus fell to C$5.4 bn, the lowest in 4 months due to a combination of lower nominal exports and higher imports (+15.4% to C$3.4 bn, the highest level in over 2 years). Furthermore, the nonenergy goods trade deficit deteriorated to C$8.1 bn. “

“The goods trade surplus with the U.S. narrowed to C$2.6 bn, while the deficit with the European Union marginally stretched to C$1.2 bn. In real terms, exports and imports were up 0.2% and 1.5%, respectively.”

“The trade surplus with the U.S. narrowed and will perhaps alleviate the negative rhetoric from our southern neighbors in the ongoing NAFTA negotiations.”

“One glimmer of hope was found in the improvement of two-way trade, i.e. rising real exports and imports, a positive development following a sharp retreat in January. Regardless, the first two months of the year suggest trade may be a drag on the economy for a fifth consecutive quarter in Q1. Such a long streak of negative contributions have not been seen since 1996-97. And this time there may be no offset from business investment spending (as was the case in Q4 last year) given the expected decline in imports of machinery and equipment in the first quarter.”