Canada's Trade Surplus Widens in November

Canada's trade situation improved in November, as a small decrease in exports was well overweighted with a 10.1% drop in imports. The consequent balance of merchandise trade was a surplus Can$7.3 billion, the third largest on record. In US$, the surplus pierced US$6 billion, the largest ever.

Exports fell 2.9%, with moderate reductions in several types of products. By geography, the largest absolute drop occurred in shipments to the US, but percentage-wise, shipments to Europe were off by more than 10% on the month.

The drop in imports featured sizable declines – 10% or more – in a variety of product-types. Among regions, the US and Europe both had double-digit declines in sales to Canada.

Part of the drop in imports is a continuing correction to sizable increases that pushed the Canadian-dollar value of imports to a record Can$31.8 billion in both May and July. But Canadian statistics officials pointed out today that the November performance accompanied a marked increase in the exchange rate; this was 4.2% in November alone in US$/Can$ terms, extending a rise that totaled 15% since May. As clearly evident in the graph, the value of Canada's imports has a remarkable relationship with the exchange rate. Percent changes in the rate (shown here in the reciprocal Can$/US$) have a substantial 86% correlation with the monthly change in the difference of imports measured in Can$ less imports measured in US$. Trade with the US of course dominates Canadian trade (imports from the US are about two-thirds of Canada's total) and this tight currency value relationship highlights how strong that bond is, even on a month-to-month basis.