positive on the future, sounds good, enjoy!
Mark
February 2010
CANADIAN EXPORTS RISE ON U.S. INVENTORY RESTOCK, DEFICIT WIDENS AS DOMESTIC
ECONOMY STRENGTHENS
* Trade deficit widens to $246 million from $201 mil-lion on the back of a
1.7% gain in exports and 1.8% gain in imports
* U.S. demand drives Canadian exports for the third consecutive month on
massive inventory restock
Canadian international trade data for December indicated that exports grew
for the fourth consecutive month by 1.7%, while imports grew by a slightly
greater 1.8%. This caused the trade deficit to widen from $201 million to
$246 million. For the third consecutive month, the main driver of export
growth has been U.S. demand, in spite of all the talk sur-rounding its
subdued recovery.
Though, this was not surprising. U.S. GDP data for the fourth quarter
indicated that the American economy grew by 5.7% on an annualized basis and
suggested a widespread restocking of depleted inventories. This was likely
the main influence for such strong demand for Canadian exports. The trade
surplus specifically with the U.S. widened in December to $3.7 billion from
$3.4 billion in November on the back of a 2.9% and 2% gain in exports and
imports, respectively. Consistent with this notion is the fact that much of
the gains in exports to the U.S. were attributed to passenger cars, stocks
of which were heavily depleted following the Cash for Clunkers program that
ended last summer.
Total exports of passenger cars grew by an impressive 11.7% in December and
were, indeed, the main driver of the headline export figure. In fact,
exports in this sub-sector have already recovered fully to their pre-crisis
level. Other big gainers were machinery & equipment exports and energy
product exports which grew by 3.4% and 1.5%, respectively. On the import
side, the gains were broad based, but largely driven by motor vehicle parts
and crude oil imports which grew by 11.1% and 17.0%, respectively.
CANADIAN INTERNATIONAL MERCHANDISE TRADE
December-09
C$, Blns.
M/M %Chg.
Y/Y
.%Chg.
TRADE BALANCE (C$, blns)*
-0.25
--
--
VOLUME OF EXPORTS
VOLUME OF IMPORTS
--
--
0.7
1.8
-3.4
1.1
VALUE OF EXPORTS
Energy Products
Industrial Goods and Materials
Machinery $ Equipment
Automotive Products
32.2
--
--
--
--
1.7
1.5
-1.1
3.4
8.0
-8.0
13.0
-4.4
-23.7
-1.5
VALUE OF IMPORTS
Energy Products
Industrial Goods and Materials
Machinery $ Equipment
Automotive Products
32.4
--
--
--
--
1.8
5.4
2.9
-2.4
6.0
-9.1
2.9
-15.9
-19.1
9.6
*Previous month revised trade balance level
Source: Statistics Canada/Haver Analytics
December's figure rounds out the last quarter of 2009 in which the trade
deficit improved slightly from $18.5 billion in the third quarter to $17.6
billion at annual rates in the fourth quarter. Thus, net trade will add to
growth when fourth quarter GDP data is released later this month, but will
likely be a drag beyond that. Although the U.S. inventory readjust-ment will
continue, its pace will likely slow in the coming quarters; in addition,
heavy uncertainty remains regarding the state of global demand in the face
of an EU deficit crisis emanating from Portugal, Spain, and Greece. Thus
far, the latter turn of events has been putting downward pressure on the
Canadian dollar as a flight-to-safety mentality and questionable commodity
demand has dominated investor sentiment. The dollar is down more than 4%
since its recent peak hit in the middle of January and currently sits at
93.6 cents, thus improving overall export competitiveness
However, this is likely to be temporary. Talks of a Ger-man bailout have
already calmed investors and once senti-ment returns to looking at economic
fundamentals, strug-gling overall demand originating from the EU and the
U.S., our largest trading partners, and the strength in Canada's domestic
economy will likely drive currency investors back into the Canadian dollar
and inhibit overall export growth.
In spite of the fact that we lack any robust recovery in exports, which yet
sit 27.5% below its peak hit in July of 2008, we continue to expect the
overall economy to grow in excess of 3% on an annualized basis in every
quarter of this year with domestic demand the main contributor to that
growth.
I hope this finds you Happy and Healthy!
All the Best!
Mark
A. Mark Argentino
P. Eng. Broker
Specializing in Residential & Investment Real Estate
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