Canada’s trade surplus hits 13-year high, signaling stronger-than-expected economy

Data, another positive sign for the Bank of Canada

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Canada’s trade surplus widened for a sixth straight month in November, easing concerns about the economic impact of flooding in British Columbia and providing further evidence that the economy was strengthening before the Omicron surge.

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The gap between the value of exports and imports was $ 3.1 billion in November, the largest in 13 years, compared to $ 2.3 billion in October, Statistics Canada reported on January 6.

Merchandise exports rose 3.8% to $ 58.6 billion, and imports hit a record $ 55.4 billion. Both figures were influenced by COVID-19 drugs, including exports, as a large shipment was imported for labeling and packaging before being reshipped.

Yet there was evidence of strong demand beyond the peculiarities of the global vaccine trade. Exporters of chemicals, energy and lumber all posted impressive gains, a bright spot for a country that relies on international demand for its goods and services for a significant portion of its wealth.

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“The trade surplus is at its highest level since the global financial crisis. So a very positive result indeed, ”said Stephen Brown, senior economist at Capital Economics, in an interview.

Bank of Canada to view data as further indication of economic strength as he tries to figure out when to start raising interest rates. Royal Bank of Canada Deputy Chief Economist Dawn Desjardins suspects that the economy has gained enough momentum in the last half of 2021 to help it cope with the impacts imposed by the highly transmissible variant of ‘Omicron.

“I don’t necessarily think this will be enough to see (the Bank of Canada) move away from the idea that the economy no longer needs these extraordinarily low interest rates,” Desjardins said of the spread of COVID-19 and the central bank’s response.

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Imports of consumer goods also continued to increase, climbing 5.2 percent. Imports of metals rose 7.3 percent after falling 8.2 percent in October. Although imports increased overall, there was a 3.4% drop in electronic and electrical equipment and a 0.8% drop in machinery and equipment imports, an indication that investments by domestic enterprises have declined. been affected this month, Brown said.

Floods, which blocked freight lines and cut off access to highways, likely played a role in larger supply chain disruptions around the world that affected companies’ ability to purchase electronics. and equipment this month. It is still a small concern, eclipsed by the reconstruction effort and the indications of almost half of the companies polled by the Bank of Canada that they intend to invest more in the next year.

“As soon as these products are available, (companies) will start investing,” Brown said. “Due to the strength in the fourth quarter, some of that weakness we’re going to get in January and February won’t be as much of a problem.”

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