Canada reported a trade surplus of $710 million in September, after imports fell and exports rose from the previous month.
That’s an improvement on the $463 million deficit in August and reflects the impact of a lower Canadian dollar.
Statistics Canada says merchandise imports were down 1.5 per cent to to $44.1 billion as Canada imported less energy and mining and mineral products.
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Exports expanded 1.1 per cent to $44.8 billion in September, led by motor vehicles and parts. A resurgent auto industry led to 8.6 per cent more exports of cars and light trucks.
The improved exports come as Bank of Canada governor Stephen Poloz continues to express concern about the slow recovery of the manufacturing sector. In a speech yesterday, he said it could be years before Canada lives up to its export potential.
Poloz on Canada's loss of capacity
In an appearance before the House Standing Committee on Finance today, Poloz said exports appear to be responding to a lower loonie, but loss of capacity in the export sector means it will be a slow recovery.
“It is clear that our export sector is less robust than in previous cycles,” Poloz said, adding that the Bank of Canada did a study last year into which sectors had been weakened by a persistent high dollar.
“After sifting through more than 2,000 product categories, we have found that the value of exports from about a quarter of them has fallen by more than 75 per cent since the year 2000. Had the exports of these products instead risen in line with foreign demand, they would have contributed about $30 billion in additional exports last year,” he said.
He pointed to factory closings and restructuring throughout the sector, with the loss of more than 700,000 jobs. In order to reverse that loss, existing companies must expand, Poloz said.
“Our Business Outlook Survey interviews indicate that while companies plan to invest in new machinery and equipment, few are planning to expand their capacity, at least so far. This helps explain why business investment might be delayed relative to what would be expected in a normal cycle,” he said.
Poloz said there is a significant “output gap” – the extent to which the Canadian economy is not showing its full potential.
Farm exports down
Exports of consumer goods rose 6.6 per cent to $5.2 billion, but farm, fishing and food exports fell by 10.5 per cent, led by the 25 per cent decline in wheat exports. A poor quality wheat harvest and lower prices for canola are hitting the farm sector hard.
Imports from the United States rose 0.7 per cent to $29.7 billion
Exports from the U.S. were up 0.8 per cent to $33.7 billion, leaving Canada's trade surplus with that country virtually unchanged in September.
The economic slowdown in Europe and China put a drag on exports to the rest of the world and the rising price of oil means continued uncertainty.
"The near-term outlook for exports is a bit mixed," said TD Bank economist Diane Petramala.
"inancial markets have exhibited a great deal of uncertainty since September, which has put some doubt on the pace of future global economic growth. Moreover, a $25 US drop in the price of oil since then will certainly weigh on the trade balance and overall profits for Canadian oil producers," she wrote in a note to investors.
U.S. trade figures
For the U.S. this was more of a problem, as the stronger U.S. dollar has made American goods more expensive.
The U.S. trade deficit expanded 7.6 per cent in September to 43 billion, according to the Commerce Department.
Exports fell 1.5 per cent to $195.6 billion, led by declines in shipments of industrial supplies, consumer products and capital goods such as engines and computers.
September imports held steady at $238.6 billion for the second straight month, with the increased supply of U.S. oil cutting the need for petroleum imports. Part of that decline has come from falling oil prices, as crude imports cost 3.1 per cent less so far this year.
Petroleum exports will likely fall in the months ahead, as oil prices have slipped below $80 a barrel from more than $100 a barrel in June.