CANADA ECONOMICS
INTERNATIONAL TRADE
StatCan. 2017-10-05. Canadian international merchandise trade, August 2017
Imports: $47.0 billion, August 2017
0.0% increase (monthly change)
Exports: $43.6 billion, August 2017
-1.0% decrease (monthly change)
Trade balance: -$3.4 billion, August 2017
Source(s): CANSIM table 228-0069.
Canada's merchandise trade deficit totalled $3.4 billion in August, widening from a $3.0 billion deficit in July. Exports decreased 1.0% on lower volumes, while imports were unchanged.
Chart 1 Chart 1: Merchandise exports and imports
Merchandise exports and imports
Exports down for a third consecutive month
Following two months of large decreases, exports were down a further 1.0% to $43.6 billion in August—despite increases in 6 of 11 sections. Exports have fallen 10.6% since the record high posted in May. Volumes decreased 1.9% in August, while prices were up 1.0%. Consumer goods, basic and industrial chemical, plastic and rubber products, as well as metal ores and non-metallic minerals were responsible for the decline in export values. Exports excluding energy products were down 1.4%. Year over year, total exports edged down 0.2%.
Exports of consumer goods were down 3.8% to $5.7 billion in August, the third consecutive monthly decline. Pharmaceutical and medicinal products (-8.6%) led the decrease, mainly on lower exports to Italy. Prepared and packaged seafood products also contributed to the decline, down 10.5%, following the close of the snow crab fishing season at the end of July. Overall, volumes fell 2.4% and prices were down 1.4%.
Exports of basic and industrial chemical, plastic and rubber products declined 5.9% to $2.7 billion. Basic chemicals decreased 8.3% to $562 million in August, returning to June levels following increased exports of ethylene glycol to China in July.
Exports of metal ores and non-metallic minerals, down 9.7% to $1.5 billion, also contributed to the decrease. Lower exports of radioactive ores and concentrates (-75.3%) were attributable to shutdowns at uranium refining facilities in August. Overall, prices were up 14.7% while volumes were down 21.2%.
Offsetting movements in imports
Following the largest decline since January 2009 in July, total imports were virtually unchanged in August. Notable offsetting movements were observed in motor vehicles and parts (+2.5%), metal ores and non-metallic minerals (+9.9%), consumer goods (-1.8%) and aircraft and other transportation equipment and parts (-10.2%). Year over year, total imports were up 3.0%.
Imports of motor vehicles and parts rose 2.5% in August to $9.3 billion. Following a 17.9% decrease over June and July, imports of motor vehicle engines and motor vehicle parts were up 5.3% in August. This year, planned summer closures in the automotive manufacturing industry were more concentrated in the month of July compared with previous years. Overall, volumes increased 2.1% and prices were up 0.4%.
Imports of metal ores and non-metallic minerals rose 9.9% to $1.2 billion in August on higher volumes. Other metal ores and concentrates (+15.0%) were responsible for the increase, mostly on higher imports of lead. There were no imports of lead from Peru in July due to a national strike in the mining industry in that country.
Imports of consumer goods fell 1.8% to $10.1 billion in August, the fourth consecutive monthly decrease. Clothing, footwear and accessories (-5.9%) led the decline, mostly on lower clothing imports from Bangladesh. In the section as a whole, volumes were down 1.3% and prices decreased 0.4%.
Lower exports to the United States
Exports to the United States were down 1.8% to $32.6 billion in August, notably on lower exports of unwrought gold. Imports from the United States rose 0.9% to $30.3 billion. As a result, Canada's trade surplus with the United States narrowed from $3.2 billion in July to $2.3 billion in August. The Canadian dollar gained 0.5 US cents relative to the American dollar from July to August.
Imports from countries other than the United States decreased 1.6% to $16.7 billion in August. Lower imports from China (cellphones), Saudi Arabia (crude oil) and Norway (ships) were partially offset by higher imports from Mexico (motor vehicles and parts).
Exports to countries other than the United States rose 1.5% to $11.0 billion, as increased exports to the United Kingdom (unwrought gold) and Japan (coal and canola) were partially offset by lower exports to China (canola) and India (uranium). Consequently, Canada's trade deficit with countries other than the United States narrowed from $6.2 billion in July to $5.7 billion in August.
Real exports decrease in August
In real (or volume) terms, exports decreased 1.9% in August. For the first time since 2011, real exports declined for three consecutive months. Real imports edged up 0.2%. Consequently, Canada's trade deficit in real terms widened from $378 million in July to $1.3 billion in August.
Chart 2 Chart 2: International merchandise trade balance
International merchandise trade balance
Revisions to exports and imports in July
Revisions reflected initial estimates being updated with or replaced by administrative and survey data as they became available, as well as amendments made for late documentation of high-value transactions. Exports in July, originally reported as $44.1 billion in last month's release, were virtually unchanged in the current month's release. July imports, originally reported as $47.2 billion in last month's release, were revised to $47.0 billion.
FULL DOCUMENT: https://www.statcan.gc.ca/daily-quotidien/171005/dq171005a-eng.pdf
StatCan. The Globe and Mail. THE CANADIAN PRESS. OCTOBER 5, 2017. CANADA'S ECONOMY. Falling exports signal a slowing Canadian economy
DAVID PARKINSON, ECONOMICS REPORTER
Canada's merchandise trade deficit widened in August as exports fell for the third consecutive month, the latest sign that the country's economic boom of the first half of the year has cooled.
Statistics Canada reported that the country posted a merchandise trade deficit of $3.4-billion in August, compared with $3-billion in July.
The August shortfall was substantially bigger than the $2.6-billion expected by economists, who had thought trade might bounce back somewhat after two weak months in June and July.
The country has now racked up a cumulative deficit of $10.1-billion over the past three months of data – more than triple the deficit of the prior three months – as evidence mounts that the economy lost momentum in the third quarter.
"In case there was any doubt that peak Canadian growth is behind us, this report all but cements the case," Robert Kavcic, senior economist at Bank of Montreal, said in a research note.
A key for economists was the continued slowdown of exports, which had been a major contributor to the second quarter's stellar 4.5-per-cent annualized growth pace. Exports fell 1 per cent in the month – their third consecutive decline – despite higher prices, as volumes fell 1.9 per cent.
Since peaking in May, exports have slumped nearly 11 per cent in value, and 6 per cent by volume. The declines came during a period of sharp appreciation of the Canadian dollar, which surged 13 per cent against its U.S. counterpart between early May and early September, making Canadian goods more expensive for foreign buyers.
Imports were also less than impressive in August, coming in flat compared with July, though volumes edged up 0.3 per cent.
Economists said the weaker trend in the trade data supports their expectation that the economy has retreated to a much more moderate growth pace for the second half of the year.
Most have been looking for growth in the range of 2 per cent to 2.5 per cent in the third quarter, although the disappointing August trade numbers suggest that the pace may be closer to the lower end of that range.
However, some economists noted that U.S. demand for Canadian goods may have been slowed somewhat by the impact of the hurricane season that battered the southern United States in late August and early September. They expect that trade numbers will show a rebound in demand as those regions returned to normal business and started to repair the damage inflicted by the storms.
"Fortunately, it appears that the worst could be over for Canadian outbound shipments. Already, figures from the U.S. highlight a rebound from the economic lows reached in the aftermath of the hurricanes," said Canadian Imperial Bank of Commerce economist Nick Exarhos. "Furthermore, U.S. auto sales have rebounded smartly recently, and the elevated inventory levels that we had highlighted as a threat to Canadian exports have also come down to more normal levels."
"We continue to expect that a pickup in trade growth globally in recent quarters and signs of life in the U.S. industrial sector will ultimately support a return to a gradual uptrend in Canadian exports going forward, although attention will also be paid to any signs that the … appreciation in the Canadian dollar since early June is eating into Canada's share of foreign demand," said Royal Bank of Canada senior economist Nathan Janzen.
At a news conference in Toronto on Wednesday, Finance Minister Bill Morneau said that, despite the string of weak export numbers, Canadian exporters should still be encouraged by Canada's strong economic trend this year.
"We have seen a really positive trajectory over the past year in terms of our growth. My sense is that we will continue to have a positive economic situation in the coming quarters, and obviously over the longer term," he said. He added that the recent retreat of the Canadian dollar, which has fallen more than 3 per cent in the past three weeks, "will be helpful for [exporters]."
"So if I'm talking to exporters, I'm going to continue to say that we think there's positive opportunity for them. The broader economic trends lead me to conclude that we have a positive future."
StatCan. REUTERS. OCTOBER 5, 2017. Canada exports drop again, clouding outlook for October rate hike
David Ljunggren
OTTAWA (Reuters) - Canada’s trade deficit widened unexpectedly in August as exports fell for the third month in a row, a sign of economic weakness that analysts say could help deter the nation’s central bank from raising interest rates this month.
Statistics Canada said on Thursday that the deficit expanded to C$3.41 billion ($2.73 billion), the fifth-largest on record, from a revised C$2.98 billion shortfall in July. Analysts in a Reuters poll had expected C$2.60 billion.
Exports have fallen 10.6 percent from a high set in May, in part due to a strengthening Canadian dollar. The last time they declined three months in a row was between August and October 2015.
The Bank of Canada, long concerned by sluggish non-energy exports, has raised rates twice this year as the economy has picked up and says further hikes will depend on data. It will next announce a decision on rates on Oct. 25.
CIBC Economics analyst Nick Exarhos said the figures confirmed that growth was slowing in the third quarter and would “translate into a pause in interest rate hikes.”
The Canadian dollar weakened after the release, dropping to C$1.2545 to the U.S. dollar, or 79.71 U.S. cents, from C$1.2478, or $80.14 U.S. cents.
Exports fell by 1.0 percent to C$43.63 billion on lower shipments of consumer goods; chemical, plastic and rubber products; and metal ore and non-metallic minerals. Imports remained virtually unchanged at C$47.04 billion.
BMO Capital Markets senior economist Jennifer Lee said the data cemented her view that the central bank would stay on the sidelines for the rest of the year.
“Exports are going to subtract a lot more from growth than I think many were expecting,” she said in a phone interview.
Export volumes in August fell by 1.9 percent, marking their first consecutive three-month decline since 2011.
Overall exports to the United States, which accounted for 74.8 percent of Canadian goods exports in August, fell by 1.8 percent, while imports rose by 0.9 percent. As a result, the trade surplus with the United States shrank to C$2.31 billion from C$3.18 billion in July.
Export Development Canada Chief Economist Peter Hall blamed part of the weak performance on what he called a “big summer slump” and said the U.S. economy remained strong.
But he added: “This is disquieting. It does fly in the face of what we see in as basic demand conditions.”
Additional reporting by Fergal Smith in Toronto; Editing by Lisa Von Ahn
StatCan. BLOOMBERG. October 5, 2017. Exports Fall for 3rd Straight Month, Widening Canada’s Trade Gap
By Theophilos Argitis
- Exports are down 11% since hitting record three months ago
- Nation is running deficits in excess of C$10 billion since May
Highlights of Canada’s August Trade Report
- The trade deficit hit C$3.4 billion ($2.7 billion), the fifth-highest on record, from C$3 billion a month earlier (estimates were for a C$2.6 billion trade gap)
- Exports fell 1 percent and are down 11 percent since hitting a record in May
- Imports were little changed, but are down 6.1 percent in two months
Key Takeaways
Exports are suffering one of their biggest tumbles ever over the past three months after touching records. That may fuel concern the nation’s currency has been accelerating too quickly. Canada’s dollar has advanced about 7 percent over the past six months.
The slumping trade performance also means Canada’s expansion is losing a major engine in the second half of the year, reinforcing expectations its growth rate is poised to slow from levels over the past year rarely seen in the past couple of decades. Economists had been anticipating annualized growth of about 2.5 percent in the third quarter, from 4.5 percent in the second quarter.
Market Reaction
The report reinforces expectations the Bank of Canada -- which has been signaling it’s concern about the stronger Canadian dollar -- won’t move ahead with another interest rate increase at a rate decision later this month.
The Canadian dollar dropped 0.5 percent to C$1.2539 per U.S. dollar at 9:54 a.m. in Toronto, and is down 3.4 percent since touching a two-year high on Sept. 11. Swaps trading suggests investors are pricing in less than a 20 percent chance of a rate increase at the Bank of Canada’s Oct. 25 decision.
What Economists Say
Nick Exarhos, CIBC Economics: “After a rough two months, it got uglier for Canadian exports in August.” “That supports our call for a 2 percent or so growth pace for the third quarter, and for the Bank of Canada’s ‘monitoring’ of the economy to translate into a pause in interest rate hikes.”
Robert Kavcic, BMO Capital Markets: “In case there was any doubt that peak Canadian growth is behind us, this report all but cements the case.”
Other Details
- In volume terms, exports declined 1.9 percent and have fallen for three consecutive months for the first time since 2011. Real imports fell 0.2 percent
- Non-energy exports are down for the third month in a row, dropping 2.8 percent from a year earlier
- Auto plant shutdowns that have been longer than usual continue to play a role, with shipments of motor vehicles down 0.5 percent
- It’s only the second time in the last three decades that exports have declined by more than 10 percent in three months outside of a recession
- Energy products, precious metals, and motor vehicle exports -- in that order -- are the three biggest drivers of the three- month slump
- Electronic and electrical equipment exports (2.5 percent) and energy production (1.5 percent) led gainers in August
— With assistance by Erik Hertzberg, and Greg Quinn
EDC. OCTOBER 5, 2017. Agriculture Rocks!
Peter G. Hall, Vice President and Chief Economist
Next to water, food is the greatest human need. Funny that in general, we pay so little for it. Ah, but make it scarce, and next to water, there’s nothing we would pay more for. It’s the abundance of readily available food that makes it as affordable as it is. Not every country can make this claim, but in the availability of food, Canada is particularly blessed. For most of our modern history, we have been a ‘bread basket’ nation to the world. It’s that very abundance that has made this very necessary sector almost a non-issue in economic banter. Until recently, that is. The vast populations of the emerging world are getting richer, and demanding ever-more first-world food. Is Canada in the game?
The key markets for our food – whether raw or processed – are still developed economies. The US dominated demand, gobbling up 53 per cent of what we export to the world. Japan accounts for another 7 per cent, and the top eight markets in the EU, just over 5 per cent. But as a share of total exports of agriculture products, the developed world is either static or declining. The US, for example, accounted for close to 60 per cent of total agricultural exports back in 2000, and Japan, 10 per cent. Are we somehow losing our grip in these markets? Hardly; annual growth to developed markets in the past 15 years has averaged 5.1 per cent. Net out inflation, and that’s ahead of population growth – a sign of rising penetration.
Why the declining share? The simple answer: hungrier emerging markets. Growth there has averaged 8.4 per cent annually, taking the share of emerging market agricultural exports from 22 per cent of total in 2000 to 31 per cent in 2016. Population growth is not the only principal driver, as large parts of the emerging world are themselves dealing with sluggish population growth. Doubtless, dramatic growth is due in part to improved transportation and cold storage technologies, the impact of globalization on food taste preferences, and lower barriers to trade in foodstuffs. But the predominant driver is likely rising wealth. The pace of graduation into the middle class in emerging economies is nothing if not staggering. Brazil is purported to add 5 million annually to its middle class. In Indonesia, it is estimated to be 7 million annually. India boasts 20 million graduates annually, with an aim of soon reaching an eye-popping 30 million per annum – a pace that could technically be sustained for well over a decade. However, atop them all is China. Despite being saddled with population decline, the middle class is calculated to be increasing by the size of the Canadian population every year.
These facts translate directly into Canada’s food export story. Of our top 20 markets for food exports, eleven are emerging markets, and this select group is growing collectively by almost 12 per cent annually. The fastest-growing markets are generally notching up impressive gains in market share, and have vaulted up the rankings in the past 16 years. Even so, for most, overall shares are still around 2 per cent or lower. Mexico is an anomaly, at 2.9 per cent of Canadian agri-food exports, but unlike the rest, its share hasn’t budged since 2000.
Among emerging customers, China is a standout. With annualized growth of 15.5 per cent, China is Canada’s second-largest export market, now well ahead of third-placed Japan. Its share of total Canadian agri-food exports is no less dramatic, rising from just 3 per cent in 2000 to 11 per cent today. While other markets hold the promise of future growth that’s as dramatic, China is today’s market, and growth there will be the biggest agri-food story on the planet for years to come. Higher meat consumption is the main driver of this demand. Beyond the sheer availability of food, Canada’s key advantage in China’s marketplace is food quality. The governance of our food system is a plus in a market where trust in the domestic industry has been undermined by tainted production processes and suspicion of the soundness of key elements of the in-country supply chain. Wealthier consumers are proving a new willingness to pay for guaranteed quality, and a growing number of Canadian producers are discovering – and leveraging – this new appetite.
The bottom line? Food is again turning into a high-growth business. While traditional customers are our mainstay, and the CETA deal opens up new European opportunities, emerging markets are and will be the powerhouses of growth in all facets of Canada’s agri-food continuum for decades to come.
EDC. October 05, 2017. Export Performance Monitor
The Export Performance Monitor is a monthly publication which tracks recent movements in Canadian exports by industry and geographic market. The insight also references our Global Export Forecast which is produced twice yearly.
FULL DOCUMENT: http://www.edc.ca/EN/Knowledge-Centre/Economic-Analysis-and-Research/Documents/export-performance-monitor.pdf
TCS. October 05, 2017. CANADEXPORT. The official magazine of the Canadian Trade Commissioner Service
FULL DOCUMENT: http://tradecommissioner.gc.ca/canadexport/index.aspx?lang=eng
BOMBARDIER
BOMBARDIER. REUTERS. OCTOBER 5, 2017. Bombardier spends $2.4 billion a year on aerospace in U.S.: document
NEW YORK (Reuters) - Bombardier Inc’s aerospace business spent $2.4 billion in the United States last year, tapping more than 800 suppliers in all but three U.S. states, according to a confidential Bombardier report seen by Reuters on Thursday.
The report shows the potential impact on the U.S. economy and companies if the Canadian company’s new CSeries jetliner is effectively kept out of the U.S. market by a trade row initiated by Boeing Co earlier this year.
Boeing has accused Bombardier of receiving taxpayer subsidies that allowed it to sell the CSeries in the United States at prices below cost. Last week, the U.S. Department of Commerce proposed a duty of nearly 220 percent to compensate for the subsidies, and the agency is due to issue a decision on potential additional duties for dumping later on Thursday.
The imposition of additional duties would effectively keep Bombardier out of the United States because it would make its planes too expensive to be competitive
The report said more than half of the materials Bombardier buys for the new CSeries plane come from U.S. suppliers, with the most spending in California, Connecticut, Illinois, Iowa and Kansas, the report said.
The duties, which would affect an order for 75 planes by Delta Air Lines, would not take effect unless approved by the U.S. International Trade Commission early next year.
Bombardier has already said that its spending supports 22,700 jobs in the United States, and it has identified major CSeries suppliers such as Connecticut-based engine maker Pratt & Whitney, a unit of United Technologies Corp, and Iowa-based avionics maker Rockwell Collins Inc. United Technologies is in the process of acquiring Rockwell Collins.
The report identifies the 10 largest CSeries suppliers, including French interiors supplier Zodiac Aerospace SA, through its operations in California; Honeywell International Inc, which makes auxiliary power units in Arizona; Spirit AeroSystems Holdings Inc in Kansas; and Parker Aerospace, a unit of Parker-Hannifin Corp which has operations in Utah, California and Michigan.
Reporting by Alwyn Scott; Editing by Leslie Adler
BOMBARDIER. REUTERS. OCTOBER 5, 2017. Bombardier eyes Asian markets amid U.S. trade spat with Boeing
NEW DELHI (Reuters) - Bombardier Inc (BBDb.TO) is betting on fast-growing markets like India to boost sales of its Q400 and CSeries narrow-body planes, a senior executive said on Thursday, at a time when the Canadian planemaker faces a trade row over sales to the United States.
“The company is very focused on expanding into Asia, as we see Asia, and India for sure, as the growth engines of the sector,” said Francois Cognard, head of Asia Pacific sales at Bombardier, adding this would be its focus region irrespective of how a heated trade spat with larger rival Boeing Co (BA.N) pans out.
Cognard said he saw India’s regional connectivity scheme as “well designed” and likely to boost demand for its aircraft in the country.
India is one of the world’s fastest growing aviation markets and the government’s launch of the regional connectivity scheme last year to boost air connectivity to smaller towns and cities, is seen as a boon for small planemakers such as Bombardier and its European rival ATR.
Bombardier last week finalised a deal to sell up to 50 Q400 planes to India’s SpiceJet (SPJT.BO) valued at $1.7 billion by list prices, its largest single order to date for the turboprop plane which will boost its presence in the country.
Rival ATR, the market leader in turboprops, has also secured a provisional order for 50 ATR 72-600 aircraft, worth over $1.3 billion at list price, from Indigo, India’s biggest airline by market share.
In turboprops, Bombardier still trails ATR, which controls about 75 percent of the market and is co-owned by Airbus SE (AIR.PA) and Leonardo SpA (LDOF.MI). Brazilian rival Embraer SA (EMBR3.SA) has also said it would consider returning to the prop market.
“There are still a lot of markets where you can’t beat a turbo in terms of economics,” said Cognard, adding Bombardier’s move to increase the number of seats on the Q400 gave the plane a cost edge in the category.
BOEING SPAT
The focus on Asia comes at a time when Bombardier is locked in an acrimonious trade spat with U.S. rival Boeing.
The U.S. Commerce Department last week slapped preliminary anti-subsidy duties of 220 percent on Bombardier’s new jets, after a complaint from Boeing, which could effectively triple the price of the aircraft and shut it out of the U.S. market if upheld.
“We see this as an abuse of trade laws by Boeing to attempt to block us from penetrating the U.S. market,” Cognard said.
The U.S. jetmaker alleges the CSeries would not exist without hundreds of millions of dollars in launch aid from the governments of Canada and Britain, or a $2.5 billion equity infusion from the province of Quebec and its largest pension fund in 2015.
The Commerce Department’s penalty against Bombardier will only take effect if the U.S. International Trade Commission (ITC) rules in Boeing’s favor.
“We expect the final ruling on this early next year,” said Cognard, adding that its customers were not concerned about the spat and more focused on the economics of the jet, which boasts impressive fuel efficiency.
(This story corrects to planes from jets in paragraph 1)
Reporting by Aditi Shah; Writing by Euan Rocha, editing by David Evans
________________
LGCJ.:
