Canada maintains trade surplus in February

Canada maintains trade surplus in February

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According to Statistics Canada, in February, Canada’s merchandise exports decreased by 2.7 percent, while imports fell 2.4 percent. As a result, Canada’s merchandise trade surplus with the world narrowed from $1.2 billion in January to $1.0 billion in February. This was the first time since late 2016 that the trade balance was in a surplus position for two consecutive months.

Recently, the supply of semiconductor chips—used in the manufacture of several products, including motor vehicles—began to fall short of worldwide demand. Many auto assembly plants in North America had to reduce or stop production, and this had a significant impact on Canadian exports and imports of motor vehicles and parts in February. As explained in the most recent release of the Monthly Survey of Manufacturing, the shortage of semiconductor chips is expected to further reduce vehicle production in the months ahead. This situation could also be exacerbated by the recent blockage of the Suez Canal.

Exports of motor vehicles and parts decreased by 10.2 percent to $6.1 billion, the second-largest decrease in the exported product sections in February. Exports of passenger cars and light trucks decreased by 11.5 percent as many assembly plants in Canada were forced to slow production because of the lack of semiconductor components. Exports of engines and parts (-7.9 percent) were also down significantly in February.

Imports of motor vehicles and parts fell 7.8 percent to $8.0 billion, the largest decrease among import product sections in February. Imports of engines and parts (-14.4 percent), which frequently include semiconductor chips as inputs, posted the largest decline. Imports of passenger cars and light trucks (-4.6 percent) were also down significantly, with worldwide production adjusting to this new challenge.

After a surge of 8.2 percent in January, total exports decreased by 2.7 percent to $49.9 billion in February, a level 4.1 percent higher than that set in February 2020. The largest declines were observed in the metal and non-metallic mineral products, motor vehicles and parts, and aircraft and other transportation equipment and parts product sections. Non-energy exports declined by 6.5 percent. In real (or volume) terms, total exports were down 3.8 percent.

Exports of metal ores and non-metallic minerals decreased by 26.7 percent in February, mainly because of lower exports of iron ores (-39.8 percent). Despite the COVID-19 pandemic, exports of iron ores rose 16.8 percent in 2020 and then reached a record in January 2021, mainly because of higher global demand for these products. Notwithstanding the monthly decrease, demand remained strong for these commodities.

Total imports decreased by 2.4 percent in February to $48.8 billion, their lowest level since August 2020. Imports of motor vehicles and parts had the largest decline, followed by energy products. In real (or volume) terms, total imports were down 3.5 percent.

Following five months of growth, exports to countries other than the United States decreased by 11.7 percent in February to $12.5 billion. There were lower exports to the United Kingdom (gold), Saudi Arabia (other transportation equipment) and the Netherlands (iron ores and oilseeds).

Imports from countries other than the United States fell 3.6 percent in February. Imports from Mexico (various products), Switzerland (metal products and pharmaceutical products) and Germany (various products) posted the largest decreases.

Canada’s trade deficit with countries other than the United States widened from $4.7 billion in January to $5.7 billion in February.

After a 10.5 percent rise in January, exports to the United States increased by 0.8 percent in February to $37.4 billion. Large declines in exports of motor vehicles and parts were more than offset by the strong increases in exports of natural gas and crude oil, which were mainly driven by higher prices.

Imports from the United States were down 1.7 percent to $30.6 billion, mostly because of the decrease in imports of motor vehicles and parts. Canada’s trade surplus with the United States widened from $5.9 billion in January to $6.8 billion in February. This was the largest surplus since September 2008.

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