Canada has seen its trade surplus with the world grow at a rate twice as high as anticipated in September, thanks to an increase in crude oil prices that boosted exports for the third consecutive month, according to recent data.
Statistics Canada reported that in September, Canada's trade surplus reached C$2.04 billion ($1.48 billion), surpassing the C$1.00 billion surplus predicted in a Reuters poll. Furthermore, August's surplus was revised upward to C$949 million from its previous figure of C$718 million. Stuart Bergman, Chief Economist at Export Development Canada, noted that "a lot of the gains [were] driven by energy pricing."
In September, exports rose by 2.7%, with a 0.4% increase in volume. The energy sector led the gains, primarily due to higher crude oil prices coinciding with OPEC+ extending voluntary production cuts. Wheat exports also saw a significant increase, exceeding 50%, thanks to favorable weather conditions that facilitated a swift harvest in 2023. Bergman noted that the quick wheat harvest might affect future gains, but it was nonetheless a substantial contributor to Canada's trade surplus.
The Canadian dollar experienced a 0.5% decrease, trading at 1.3760 per U.S. dollar or 72.67 U.S. cents. This decline was influenced by falling oil prices and a stronger U.S. dollar against major currencies.
Offsetting some of the gains, exports of metal and non-metallic mineral products dropped by 10.7% in September after reaching an all-time high in August. On the import side, there was a 1.0% increase, driven by passenger cars and light trucks. The motor vehicle and parts sector continued to rise for the sixth consecutive month, despite strikes disrupting trade with the United States, Canada's largest trade partner. On a volume basis, total imports increased by 1.7%, suggesting a decrease in prices.
Amid these trade developments, the Canadian economy faced challenges and potential signs of a shallow recession in the third quarter due to the impact of the Bank of Canada's ten interest rate hikes since the previous year. The bank has projected subdued economic growth until the end of 2024, with a gradual pickup anticipated in 2025.
Shelly Kaushik, an economist at BMO Capital Markets, commented that "stripping out price effects, trade looks to have added to growth in the third quarter," indicating a positive outlook despite the broader slowdown resulting from aggressive monetary tightening measures.