U.S. still Canada’s biggest customer

From The Globe and Mail

Canada posted a second consecutive monthly trade surplus for the first time in more than two years in December, but booming oil exports obscured weakness in some key sectors.

The $923-million surplus announced by Statistics Canada on Tuesday exceeded analysts’ forecasts of a $350-million positive balance. Statscan revised November’s surplus up to $1.01-billion from an initial $0.53-billion.

Canada last recorded back-to-back monthly trade surpluses in August and September 2014.

But while overall exports rose by 0.8 per cent in December, export volumes actually fell by 1.4 per cent.

“This wasn’t a good news story in the most recent month … the feed through to December real GDP from these data will be on the soft side,” said Avery Shenfeld of CIBC Economics.

Energy product exports jumped by 15.9 per cent, the biggest month-on-month leap in six years, on strength in crude oil and bitumen.

Exports of motor vehicles and parts fell 5.2 per cent to the lowest level since June 2015. Statscan said a higher proportion of Canadian-produced motor vehicles were destined for the domestic market.

Peter Hall, chief economist at Export Development Canada, noted there was no sign of a let-up in U.S. demand for autos and said overall he was pleased with the trade data.

“This gives us good momentum going into 2017,” he said.

The December figures could prompt some reflection at the Bank of Canada, which has long fretted about weak non-energy exports and is waiting to see what the new U.S. administration does about trade.

Last month, the central bank said “prospective protectionist trade measures in the United States would have material consequences for Canadian investment and exports.”

Imports increased 1.0 per cent on higher imports of aircraft and other transportation equipment as well as metal products. Volumes rose by 0.4 per cent.

Exports to the United States, which accounted for 73.6 per cent of all Canadian exports in December, grew by 0.2 per cent while imports rose by 1.3 per cent. As a result, Canada’s trade surplus with the United States slipped to $4.42-billion from $4.74-billion in November.

The Canadian dollar strengthened slightly to $1.3170 to the U.S. dollar, or 75.93 U.S. cents, compared to $1.3190, or 75.82 U.S. cents, before the data were released.

Separately, Statscan said the value of building permits issued in December dropped by 6.6 per cent on weakness in the residential and non-residential sectors.

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