Recent international trade numbers suggest some improvement in Canada's limping economy

Statistics Canada’s just released snapshot of Canada’s trade performance in June offers a hint that the much anticipated upturn in non-energy exports may finally be materializing.

The Bank of Canada and private sector forecasters have been calling for a rebound in Canadian non-energy exports in light of the depreciating loonie and ongoing economic growth in the United States. But it has been slow to come, prompting worries that Canada’s economy could continue to struggle following five consecutive months of negative GDP readings over the January-May period.

Encouragingly, June saw a solid 6.3% jump in the value of Canadian merchandise exports, with imports showing little change. The net result was a sharp drop in the country’s trade deficit after a somewhat alarming rise earlier in the year. In a world of generally sluggish commodity prices, the June export data look even better.

Adjusted for inflation, the volume of Canadian international merchandise exports increased by almost 5% in June, fuelled by gains in industrial machinery and equipment, consumer goods, forestry products, and – surprisingly – metallic and non-metallic mineral products. Real energy exports edged lower. Measured in current dollars, Canada’s energy exports in June were 31% lower than in the same month last year.

As expected, exports to the United States posted an impressive advance, growing by 7.1% in dollar terms between May and June. Export shipments to China and Japan also registered healthy gains.

The June trade data look positive from a BC perspective. The strength in non-energy categories augurs favourably for the province’s exports over the balance of 2015 and into 2016, as the US economic expansion gathers momentum and the slumping Canadian dollar continues to provide a tailwind for export-oriented BC industries. Although they are not included in the merchandise trade figures reported above, BC sectors such as tourism, film and television production, and tradable business and professional services also stand to benefit from the rebounding American economy and a Canadian dollar that is now trading at decade lows vis-à-vis the US greenback.

We remain comfortable with our recently published mid-year economic forecast that sees the BC economy growing by 2.4% (after inflation) in 2015 and around 3% next year, spurred in part by a pick-up in exports and a slightly smaller overall trade deficit.