CANADA ECONOMICS

StatCan. 2017-05-01. Gross domestic product by industry: Provinces and territories, 2016

Annual real gross domestic product by industry — Canada
2016
1.3% increase
(annual change)
Source(s): CANSIM table 379-0031.

Real gross domestic product (GDP) by industry increased in eight provinces and two territories in 2016. GDP declined for the second consecutive year in Alberta and Saskatchewan, largely as a result of low oil and commodity prices. GDP also declined in Northwest Territories. Nationally, real GDP by industry rose 1.3% in 2016, following a 0.9% increase in 2015.

British Columbia led the provinces with GDP growth at 3.7%, followed by Ontario (+2.6%), Manitoba (+2.4%) and Prince Edward Island (+2.4%). For the second consecutive year, the largest decline in GDP was in Alberta (-3.8%).

Chart 1   Chart 1: Real gross domestic product, 2016
Real gross domestic product, 2016

 
Newfoundland and Labrador

In Newfoundland and Labrador, GDP increased 1.9% in 2016 following a 1.8% decline in 2015. Growth was largely attributable to a 22% gain in output of conventional oil and gas extraction, due to higher output from the Hibernia oilfield. Construction output fell 3.7%. Engineering construction grew 5.0% as work on the Muskrat Falls electric power project more than offset declines in oil and gas engineering construction and other engineering construction. Non-residential construction declined 38% as major industrial and commercial projects were completed.

Manufacturing fell 7.9%. Boat and ship building accounted for most of the decline with the completion of a large drilling module in 2015. Fabricated metal products and refinery production also contributed to the decline. Non-ferrous metal products and seafood products preparation and packaging increased. Aquaculture increased 24% and fishing, hunting and trapping fell 8.6%.

Service-producing industries edged up 0.1%. Higher output of finance and insurance services, health care and universities was mostly offset by lower output in wholesale trade, professional, scientific and technical services, and retail trade.

Prince Edward Island

GDP rose 2.4% in Prince Edward Island in 2016—the strongest growth in 10 years—following a 1.3% gain in 2015. Goods-producing industries rose 3.2%. Construction increased 9.3%, led by electric power engineering construction as work continued on the Interconnection Upgrade Project to lay new power cables between the island and New Brunswick. Non-residential (+12%) and residential building construction (+4.5%) also advanced.

Manufacturing grew 3.7%, as increases in food products and aerospace products and parts more than offset declines in pharmaceuticals and medicines, and machinery. Crop production increased 3.8% on both higher yields and average quality of the potato harvest. Aquaculture output increased while fishing, hunting and trapping declined on a lower lobster catch. Wholesale trade (+3.9%) increased in tandem with goods output.

Services-producing industries grew 2.1% and accounted for almost 70% of total economy growth with gains in most subsectors. Finance and insurance industries increased 3.6%, led by banking and financial investment services. Offices of real estate agents and brokers rose 21%, driven by record sales of residential properties. Retail trade grew 3.2%, largely from stronger sales of motor vehicle and parts dealers. A good tourism season contributed to a 4.2% increase in accommodation and food services.

Nova Scotia

Nova Scotia's GDP rose 0.9% in 2016, following a 1.0% increase in 2015. Services output increased 1.0% and contributed the most to the gain, while goods output grew 0.5%. Retail trade advanced 2.0% with gains in motor vehicle and parts dealers and general merchandise stores. Air transportation services rose along with traveller accommodation, while wholesale trade and administrative support services declined. In the public sector, health care and social assistance, universities, and local, municipal and regional public administration added to the increase.

Construction increased 4.3%, led by a 26% increase in engineering construction as work began on the Nova Scotia segment of the Maritime Transmission Link and the development of the Touquoy gold mine got underway. However, non-residential building construction declined 11% with the opening of the new Halifax Shipyard Assembly facilities in 2015 and the near completion of a large hotel, convention centre and office complex in Halifax.

Manufacturing increased 2.8%, led by ship and boat building as the new Arctic and Offshore Patrol Ship project continued. Aerospace products and parts, sawmills and wood preservation, seafood products and preparation all contributed to growth. At the same time, paper manufacturing, fabricated metal products, and miscellaneous food manufacturing declined.

The mining, quarrying and oil and gas extraction sector fell 9.2%. There were decreases in oil and gas extraction (-2.1%), support activities to oil and gas extraction (-29%) and non-metallic mineral mining (-7.2%). Fishing, hunting and trapping contracted 9.0%, mainly due to a late start to the lobster season and unfavourable weather conditions.

New Brunswick

In New Brunswick, GDP grew 1.4% in 2016, following a 2.1% gain in 2015. Services-producing industries rose 1.5% and goods-producing industries grew 1.0%. Finance and insurance industries grew 3.5%. Retail trade advanced 2.7% on widespread gains across most types of stores, while wholesale trade rose 4.4%. Computer systems design and related services, truck transportation, and food services and drinking establishments contributed to the growth, while architectural, engineering and related services declined. In the public sector, higher output by hospitals and local, municipal and local administration services more than offset a decline in defence services.

Construction increased 4.2% on contributions from all major subsectors. Engineering construction grew 8.7%, mostly as a result of the Interconnection Upgrade Project to upgrade power cables between New Brunswick and Prince Edward Island and, to a lesser extent, a maintenance project at the Saint John refinery. Non-residential building construction increased 8.5% with modernisation work at a pulp and paper mill and the start of construction of a new office tower in Saint John.

Manufacturing increased 1.1%, led by gains in output of food products, wood and paper products, primary metal products, non-metallic mineral products, and transportation equipment. Output of petroleum refineries declined 2.2% while miscellaneous manufactured goods output declined significantly. Aquaculture increased 8.9%, and fishing, hunting and trapping advanced 4.7%. Forestry and logging grew 3.2%.

Mining and quarrying fell 24% as the impact of the closing of the Piccadilly potash mine more than offset higher output at the Caribou lead and zinc mine.

Quebec

Quebec's GDP grew 1.7% in 2016, following a 1.2% increase in 2015. Services output rose 2.2% and contributed the most to the increase. Gains were reported by banking, financial investment services, lessors of real estate, retail trade, and wholesale trade, as well as air and truck transportation. In the public sector, hospitals, universities, and local, municipal and regional public administration services also contributed to the growth.

Goods-producing industries advanced 0.5%. Construction output grew 1.5%, the first increase since 2012, with contributions from electric power engineering construction and residential building construction. Non-residential building construction fell 7.1%, the fourth successive year of contraction, as construction on health and education facilities declined.

Manufacturing output fell 0.4%, as losses in aerospace products and parts (-12%) and alumina and aluminum products (-11%) more than offset gains in food products, pharmaceuticals and medicines, wood products, machinery, and plastic and rubber products.

Mining and quarrying increased 0.9% as higher output from gold and silver mines, copper, nickel, lead and zinc mines, as well as the first production from the Renard diamond mine, more than compensated for lower iron ore mining and other non-metallic mineral mining.

Ontario

Ontario's GDP rose 2.6% in 2016, following the same gain in 2015. Service-producing industries (+3.0%) contributed more to the growth than goods-producing industries (+1.3%). A robust housing market led to a 7.5% increase in residential construction and influenced gains in banking services, lessors of real estate, real estate agents and brokers, and insurance carriers. Total construction activity (+1.6%) was tempered by declines in engineering construction and, to a lesser extent, non-residential construction.

Wholesale trade grew 3.9% and retail trade advanced 3.5%, with growth reported in all but one trade industry. Professional, scientific and technical services were up 3.7%, largely on increased activity in computer systems design and related services. Financial investment services, air and truck transportation, as well as, federal government public administration contributed to the growth.

Manufacturing increased 1.8%, following a 1.1% gain in 2015. Increases in output were reported by motor vehicle parts, food products, plastic products, primary metal products, and pharmaceuticals and medicines manufacturing. Fabricated metal products, petroleum and coal products as well as printing and related products declined.

Electric power generation, transmission and distribution increased 3.0%. Low metal ore prices contributed to a significant decline in support activities for mining, with activity in this industry down 85% from its peak in 2012.

Manitoba

Manitoba's GDP increased 2.4% in 2016, following a 2.1% gain in 2015. Goods output rose 3.4%, mainly because of a 20% increase in engineering construction as work on major electric power generation and transmission projects progressed, more than offsetting a large decline in oil and gas engineering construction. In contrast, residential building construction fell for the third consecutive year as housing starts fell to their lowest level since 2009. In addition, non-residential building construction decreased 4.4%, mainly the result of a decline in the construction of institutional and government buildings.

Manufacturing grew 2.4%, as gains in food products, pharmaceuticals and medicines, wood products, and miscellaneous manufactured goods offset losses in transportation equipment and agricultural, construction and mining machinery. Electric power generation, transmission and distribution increased 2.4%.

Crop production grew 4.5% following a 14% gain in 2015. However, output remained below the bumper crop year of 2013. Low oil prices contributed to an 11% decline in conventional oil and gas extraction, the fourth consecutive year of contraction. Copper, nickel, lead and zinc mining increased 3.4%. Support activities for both mining and for oil and gas extraction dropped significantly.

Service-producing industries rose 2.0%. Finance and insurance services increased 3.9% on higher output from financial investment services, banking services and insurance carriers. There were also notable contributions from retail trade, transportation and warehousing, health care services, lessors of real estate, and food and drinking places. Wholesale trade was essentially unchanged.

Saskatchewan

In Saskatchewan, GDP fell 1.0% in 2016 following a 1.3% decline in 2015. This was the first time since 2001 and 2002 that GDP has declined for two consecutive years in the province. Goods-producing industries fell 2.9% and contributed the most to the decline, largely due to decreases in construction (-14%) and in mining, quarrying and oil and gas extraction (-4.5%). In contrast, crop production increased 6.2% due to above average yields.

Against a backdrop of low oil and commodity prices, engineering construction (-31%) fell sharply for the second consecutive year, as construction of oil and gas extraction projects and mining projects were scaled back. Lower output of electric power engineering construction also contributed to the decline. Residential construction was down 7.3%, following a 14% decline in 2015, as the number of housing starts fell to their lowest level since 2009. Non-residential building activity increased 11%, due to higher investment on institutional and government structures.

Manufacturing output increased 2.9%, following a 4.9% decline in 2015. Strong growth in grain and oilseed milling and, to a lesser extent, increases in pesticide, fertilizer and other agricultural chemical manufacturing, wood products, and agricultural, construction and mining machinery, more than compensated for declines in primary and fabricated metal products, and petroleum refineries.

Services output grew 0.6%, the lowest growth rate in 20 years (since the time series began). Gains were posted in public sector industries such as health care and social services (+2.7%), education (+2.5%), and local, municipal and regional public administration (+2.4%). Banking and local credit unions grew. Retail trade was up 0.3% as gains in health and personal care stores and gasoline stations were mostly offset by lower sales of motor vehicles and parts, which fell for the second consecutive year. Wholesale trade decreased 4.3% with losses across most wholesaling industries.

Alberta

In Alberta, GDP decreased 3.8% in 2016 after a similar decline (-3.7%) in 2015. The last time GDP fell for two consecutive years in Alberta occurred in 1982 and 1983. Goods-producing industries fell 8.6% while services-producing industries declined 0.7%. Low oil prices led to a 32% decline in oil and gas engineering construction following a 34% decline in 2015. Support activities for oil and gas extraction also decreased significantly for a second consecutive year, falling 32% following a 38% drop in 2015. Together, these two industries again accounted for most of the decline in GDP and contributed to lower output in many related industries.

Non-conventional oil and gas extraction increased 1.0% (the smallest increase since 2008), despite the wildfires in the Fort McMurray area in May and significant maintenance shutdowns at upgrader facilities, as annual production rose at large capital-intensive oil sands projects. Conventional oil extraction edged up 0.2%.

Manufacturing decreased 7.6%, as 15 of 19 major industry groups fell. Machinery and fabricated metal products contributed the most to the decline. The only notable increase was in chemical manufacturing (+7.8%), largely due to higher output of basic chemicals and agricultural chemicals.

Residential construction declined 20%, as a result of the fewest housing starts since 2009 and the second lowest number since 1997. Net interprovincial migration turned negative for the first time since the 2009 recession and only the second time in 21 years. Non-residential construction decreased 5.9%. Conversely, crop production rose 15% due to an increase in average yield.

Wholesale trade fell 7.3% with major losses in wholesaling of machinery, equipment and supplies, and in building material and supplies. Retail trade decreased 2.9%, led by a decline at motor vehicle and parts dealers (-7.6%). Lower output was also recorded in professional, scientific and technical services, administrative and support services, and offices of real estate agents and brokers. Higher output occurred in banking and financial investment services. Public sector industries, such as provincial public administration, and local, municipal, regional public administration, health care and social assistance, and education all grew.

British Columbia

In British Columbia, GDP rose 3.7% in 2016 following a 3.1% gain in 2015, the strongest growth among the provinces for the second consecutive year. While both goods-producing (+4.6%) and service-producing (+3.5%) industries contributed to growth, the service sector contributed more than twice as much as goods to growth.

Strong demand in the housing market, largely in the lower mainland, led to a 17% increase in residential construction, and contributed to gains in offices of real estate agents and brokers, lessors of real estate, banking and insurance carriers. Retail trade advanced 5.4% on gains across all store types. Transportation and warehousing increased 5.7%, led by air transportation, truck transportation, and support services to transportation industries. Professional, scientific and technical services, and accommodation and food services, and financial investment services contributed to growth.

Engineering construction declined 9.1%, as oil and gas engineering construction fell 30% for the second consecutive year, the result of low oil and natural gas prices. However, other engineering construction grew as work on a new gold mine began.

Manufacturing output increased 5.8%. Growth was largely attributable to a significant increase in output of alumina and aluminum production and processing as a major modernisation and expansion program at the Kitimat smelter was completed in 2015. Export driven growth led to higher output of wood products and food and beverage products. Electric power generation, transmission, and distribution rose 4.7%.

Mining, quarrying and oil and gas extraction grew 3.3%. Higher output of conventional oil and gas extraction and, to a lesser extent, gold and silver offset a decline in copper, nickel, lead and zinc mining. There was also a significant decline in support activities for mining and oil and gas extraction.

Yukon

In Yukon, GDP increased 8.2% in 2016 following a 6.0% decline in 2015. Copper, nickel, lead and zinc ore mining surged 78% on higher output and ore grade at the Minto mine. Gold and silver ore mining increased significantly.

Electric power generation, transmission and distribution grew 10%. Construction declined 0.9%, as a decrease in engineering construction more than offset a 7.2% increase in residential construction. Manufacturing grew, the result of a large increase in fabricated metal products.

Transportation services, retail trade, wholesale trade, traveller accommodation, and financial investment services increased. In the public sector, health care and social assistance, territorial public administration, as well as local, municipal and regional public administration contributed to the growth.

Northwest Territories

In the Northwest Territories, GDP edged down 0.1% in 2016 following a 1.3% gain in 2015. Other engineering construction fell 52% on the completion of the Gahcho Kué diamond mine. Diamond mining increased 5.7%, as a new mine opening offset the impact of a mine closure late in 2015. Other metal ore mining fell to zero as a tungsten mine closed.

Conventional oil and gas extraction decreased 4.3% and support activities for mining, oil and gas extraction declined notably. Residential construction rose 7.4%. Non-residential building construction increased significantly, the result of a new hospital project. Air transportation, lessors of real estate, banking, and territorial public administration contributed to the growth. Both wholesale and retail trade declined.

Nunavut

In Nunavut, GDP increased 3.9% in 2016 following a 1.2% gain in 2015. Iron ore mining rose significantly as the Mary River iron ore mine ramped up production. However, both gold and silver mining and support activities for mining declined notably. Engineering construction rose 30%, as work on a new gold mine and a number of electric power stations, more than offset a decline in transportation engineering construction.

Non-residential construction fell as the finishing touches were put on the Iqaluit Aquatic Centre, and both the Iqaluit airport improvement project and the Canadian High Artic Research Station passed peak construction. Residential construction declined 15%. Services output rose 2.5%, mostly from gains in wholesale and retail trade, as well as territorial public administration.

FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/170501/dq170501a-eng.pdf

StatCan. 2017-05-01. Production and disposition of tobacco products, March 2017

Canadian manufacturers produced 1.9 billion cigarettes in March, up 17.2% from February. Cigarette production increased 1.1% compared with the same month a year earlier.

The total number of cigarettes sold increased 15.6% from February to 1.6 billion in March. This was down 9.5% from March 2016.

FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/170501/dq170501c-eng.pdf

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BLOOMBERG. 2017 M04 30. Trump Aluminum Probe Evokes 1949 Cheese and Wool Threat
by Danielle Bochove

• Canadian academic says Trump’s trade views cause for concern
• Congress has evoked war concerns in past to push protectionism

The latest U.S. trade volley against aluminum and steel imports could mark a sea-change in cooperation between Canada and the U.S. over defense production that’s been in place since World War II.

On Wednesday, the Trump administration said it will begin investigating whether aluminum imports pose a threat to self sufficiency. In the event of war, U.S. Commerce Secretary Wilbur Ross said, there is concern the Pentagon might be unable to secure enough domestic aluminum to meet its needs. The decision followed a similar investigation into steel imports.

Using national security to justify protectionism is nothing new, according to Jack Cunningham, program coordinator for the Bill Graham Centre for Contemporary International History at the University of Toronto. Back in 1949, Congress famously pressed President Harry Truman’s administration to crack down on cheese and wool imports, arguing they undermined America’s ability to be self-sufficient in times of war, to no avail.

What’s different this time around is the source of the argument.

“We’re getting protectionist sentiment from the Executive Branch and that’s something that we haven’t seen in about 85 years,” Cunningham, an historian specializing in nuclear strategy, counterinsurgency warfare and foreign policy, said by phone on Friday. “Trump is really a throwback to the wing of the Republican party that held sway in the ’20s and ’30s.”

Aluminum Security Probe Threatens Imports

The modern era of close ties between the Canadian and U.S. defense industries began in World War II with the 1941 Hyde Park Declaration, which allowed the U.S. to produce war materials in Canada for British use.

Ties tightened further in the 1950s when the U.S. began rearming for the Korean War. Later, in an effort to eliminate trade imbalances between the countries on military spending, a 1956 agreement offset Canadian purchases of U.S.-made weapons with American defense production contracts. That pattern of cooperation continued through much of the Cold War, Cunningham said.

Underpinning all of these agreements was an assumption that the U.S.-Canada relationship is unlike any other. Until a decade ago, Canadians and Americans didn’t even require passports to drive across each others’ borders -- a birth certificate and drivers’ license would do. Canadian energy has long been touted as a way for the U.S. to lessen its dependence on supply from less predictable countries in the Middle East and Africa, although Trump appears to be focusing inward on that front too.

Rio Confident

Rio Tinto Group, which ships more than 1.4 million metric tons of aluminum to the U.S. annually from Canada, was quick to issue a response to Ross’s announcement.

“We are confident this review will recognize the importance of North America’s well established aluminium supply chain, where Canadian producers play a vital role in supplying American manufacturers including in the transport, aerospace and defense sectors,” Alf Barrios, chief executive of Rio Tinto Aluminium, said by email.

Similarly, on Thursday, Leo Gerard, the International President of United Steelworkers, called for Canada to be excluded from any trade actions, noting that “in steel, the U.S. has a generally balanced trade relationship with Canada.”

Unpredictable Swings

But while the main target of the aluminum probe is top producer China, and history suggests Canadian imports should be excluded from any U.S. actions, Trump’s attitude toward Canada has proven unpredictable. In the space of a week, the U.S. president swung from attacks on Canada’s dairy and softwood lumber industries, to plans to cancel NAFTA entirely, to praise for his country’s strong relationship with the leaders of Canada and Mexico.

“He generally views international economics in zero sum terms and that is cause for concern regardless of what happens with softwood lumber, or dairy, or now aluminum,” Cunningham said.

Meanwhile Canada -- which sends about 75 percent of its 3.2 million-ton annual output of aluminum to the U.S. -- risks being caught up in an American crackdown on imports that’s being justified on the grounds of national security.

“Our biggest preoccupation is being collateral damage,” Jean Simard, head of the Aluminium Association of Canada, said by telephone.

BLOOMBERG. 2017 M05 1. OPEC May Need to Extend Production Cuts to End of Next Year
by Anthony Dipaola

• OPEC is sure to roll over cuts at May meeting: FGE’s Fesharaki
• Duration of production limits depends on oil inventories

OPEC is certain to extend cuts in oil output when its ministers meet later in May and will need to keep limiting production until as late as the end of 2018, a veteran market analyst said.

The reaction of global crude inventories to the cuts will determine how long the Organization of Petroleum Exporting Countries and allied producers stick with their policy of pumping less oil to counter a global glut, said Fereidun Fesharaki, the head of industry consultant FGE. Oil may drop to as low as $40 a barrel if U.S. stockpiles increase, he said Monday at the Middle East Petroleum and Gas Conference in Dubai.

“The probability that OPEC will agree to extend its cuts is at 100 percent,” said Fesharaki, a former adviser in the late 1970’s to the Iranian Prime Minister. “And the cuts will have to be extended even beyond this year, to the middle or even to the end of next year.”

OPEC and 11 other producers including Russia agreed in December to pare production by 1.8 million barrels a day during the first half of this year. They’re seeking to eliminate an oversupply that depressed prices to less than half of their 2014 high, when benchmark Brent crude sold at $115 a barrel. Brent jumped 52 percent last year for the first annual gain after three consecutive decreases and was trading at $51.65 a barrel, down 40 cents, at 5:18 p.m. in Dubai.

The oil market needs more time to start using up stored inventories, which are on the verge of declining, Harold Hamm, chief executive officer of Oklahoma-based Continental Resources Inc., said at the same conference. U.S. oil output is poised to expand this year by at least 400,000 barrels a day, most of it from the Permian Basin, to a level of about 9.4 million barrels a day, he said.


OPEC plans to decide on May 25 at a meeting in Vienna whether to extend its production limits. There’s a consensus that the group will extend the cuts into the second half, Saudi Arabian Minister of Energy and Industry Khalid Al-Falih said last week.

BLOOMBERG. 05/01/2017. Bloomberg View. A daily digest of opinions and analysis. Milk Wars Curdled the U.S.-Canada Relationship Long Ago


Canada’s “unfair” dairy policy is putting American farmers out of business, or so Donald Trump declared in a series of fiery remarks last month. But in reality, both countries have been fighting dirty since the 1930s. Stephen Mihm traces the bovine battle from the “milk wars” of the Depression to the present-day standoff, with a cartel on one side (“the last Soviet-style economic regime on the planet,” one critic said), and a labyrinthine system of price supports and subsidies on the other.

The Globe and Mail. May 01, 2017. ANALYSIS. Trump's NAFTA threat far worse than it looks (and it looks ghastly)
MICHAEL BABAD

Briefing highlights:

• Trade tensions promise sweeping fallout
• Canadian dollar forecast to slump further
• Pembina Pipeline strikes deal for Veresen
• What to expect from the Fed this week
• What to watch for in jobs reports
• What else to watch for: Toronto housing bubble
• America's most wanted

It’s as though Canada has suddenly become America’s “number one trade villain,” as Bank of Montreal puts it.

And the fallout promises to be sweeping even if the Trump administration’s latest shots don’t mark the beginning of an all-out trade war, as the U.S. promises and many observers believe.

Tensions are mounting in advance of renegotiating the North American free-trade agreement. President Donald Trump is taking swipes at the Canadian dairy, lumber and energy sectors. The U.S. Department of Commerce is slapping duties on softwood, and Boeing wants similar action against Bombardier.

And key in all this is that the Department of Commerce is suddenly emboldened by Mr. Trump’s trade agenda and rhetoric.

“We’re going to get a deal, and we’re going to negotiate,” trade lawyer Peter Kirby, a partner at Fasken Martineau, said of NAFTA.

“What’s more troublesome is taking the reins at the Department of Commerce and putting people in charge who are anti-free trade.”

One of the threats, Mr. Kirby warned, is to Canada’s attempts to lure investment from businesses that want access to the U.S. via NAFTA.

It will be harder now to attract such investments because “that access to the U.S. market is now looking a lot less certain.”

Carlos Capistran, the Canada and Mexico economist at Bank of America Merrill Lynch, also warned of the threat, noting that Mr. Trump still says he’ll kill NAFTA if he doesn’t get a good deal, which should be obvious.

“So risk of termination remains, and renegotiation outcomes are uncertain, especially as domestic politics will be involved – for instance Mexico has presidential elections in July 2018,” Mr. Capistran said.

“This will keep market volatility high and delay investment.”

This has all come on fast, and shouldn’t be all that surprising because negotiating tactics are at play.

But then again, it wasn’t that long ago that Mr. Trump said NAFTA only needed tweaking where Canada’s concerned.

“In fact, he said ’wreaking havoc,’” said BMO chief economist Douglas Porter.

“Somehow, Canada has suddenly replaced Mexico as the number one trade villain in some U.S. eyes, morphing from an ‘outstanding trading partner’ to a ‘disgrace’ in a few short steps,” he added in a report.

“That’s despite the well-documented fact that Canada is the number one U.S. export market, and runs as close to balanced bilateral trade as any major economy with America. And, including services, the U.S. is in a rare overall surplus position with Canada. But these alternative facts seemingly make little impression.”

At this point, many analysts say they’re not overly troubled by the impact of the softwood duties. Levies were likely to be imposed no matter who was in the White House, and are the latest in a long-running dispute.

Lumber prices are already well up from a year ago. And, noted economist David Madani, the U.S. construction industry is strong.



Not only that, Mr. Trump and Prime Minister Justin Trudeau “appear very keen” to solve their trade issues, said Mr. Madani, senior Canada economist at Capital Economics.

“More importantly, we don’t believe that the softwood lumber dispute is the start of a major trade war between the U.S. and Canada.”

That’s if all the fuss is limited to softwood and NAFTA results that don’t hurt too much, of course.

“While it is highly unlikely NAFTA will be revoked, it is certain the U.S. will continue to take an increasingly protectionist stance,” said geopolitical analyst Alex Katsoras of National Bank of Canada.

“This will be driven by the fact that opposition to free trade is one of the few things that unites an otherwise deeply divided U.S. electorate,” he added.

“In this environment, investors must do more than simply analyze the balance sheets of companies. They must also look at any ongoing or potential future tensions with trading partners, since access to foreign markets should no longer be taken for granted. The lumber sector is a case in point.”

Remember, too, that it’s not just Mr. Trump, who might otherwise be discounted given his flare for such rhetoric were he a lone voice.

“The rhetoric/bullying is having a real impact on financial markets,” BMO’s Mr. Porter said.

“Commerce Secretary Wilbur Ross, who is charged with overseeing the trade file, lashed Canada for ‘dumping lumber” and ‘subsidizing mills’ as he announced a near 20-per-cent tariff on Canadian softwood lumber,” Mr. Porter added.

“Not to quibble, but the common definition of dumping is selling in export markets below domestic prices and/or below cost, neither of which seems to be the case in this dispute. And, the triple threats to softwood lumber, the dairy industry, and NAFTA broadly sent the Canadian dollar spinning.”

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ANALYSIS

BMO (Bank of Montreal). FEATURES. CAPITAL MARKETS. 28/04/2017. Driving North American Growth and Trade

FULL DOCUMENT: https://economics.bmocapitalmarkets.com/economics/focus/20170428/feature.pdf

TD Bank. TD Economics. Analysis of economic performance and the implications for investors. The analysis covers the globe, with emphasis on Canada, the United States, Europe and Asia. May 1, 2017. U.S. Personal Income and Spending

FULL DOCUMENT: https://www.td.com/document/PDF/economics/comment/USPersonalIncome_Mar2017.pdf

RBC. ECONOMIC RESEARCH. May 1, 2017 - US consumer spending volumes higher in March

FULL DOCUMENT: http://www.rbc.com/economics/daily-economic-update/US%20PCE_Mar2017.pdf

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LGCJ.: