Canada's Weak Trade in March Suggests Q1 GDP Growth Likely to be Weaker Than Anticipated
Canada’s trade deficit broadened from downwardly revised $2.5 billion in February to $3.4 billion in March. Exports in March fell 4.8%, surpassing the decline in imports of 2.4%. Export volumes declined 2.9%, whereas import volumes dropped 0.3% in March. It was a weak month for trade, coupled with revising down February’s data.
This indicates that the first quarter growth is expected to be weaker than anticipated earlier, according to TD Economics. But real Canadian GDP is expected to grow strongly at an annualized pace of 2.5%-3%, added TD Economics. However, the strong economic growth pace is not expected to continue in the second quarter.
The fall in the export volumes in March signifies that there is not much momentum when moving into the second quarter. It also suggests that trade is unlikely to contribute to GDP growth, noted TD Economics. “We are currently tracking around 1-1.5% annualized real GDP growth – roughly half the first quarter's pace”, said TD Economics. In the medium term, Canada’s export sector is expected to continue to be a major source of strength, given the strong US economy and the likelihood of Canadian dollar to be around the 75-79 US cent range in the next few years, noted TD Economics.
In March, the decline in exports was widespread. Out of 11 sectors, 10 of them recorded declines. Exports of consumer goods, motor vehicles and parts, and metal and non-metallic mineral products declined 4.6%, 6% and 5.4%, respectively, leading the overall decline in exports. Meanwhile, the fall in imports was also widespread. Out of 11 sectors, eight saw a decline. Drop in imports were lead by lower imports of aircraft and other transportation equipment, which fell 20.4%, and consumer goods, which dropped by 4.6%.
Canada’s trade deficit with the US reduced to $1.5 billion in March from $2.1 billion in February, whereas deficit with the remainder of the world broadened to $4.9 billion from $4.6 billion.
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