Canadian international merchandise trade

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Canada's merchandise trade surplus edged down for the second consecutive month in July as imports increased at a slightly faster pace than exports, particularly from the United States.

Canadian companies exported $38.5 billion worth of merchandise, up 2.1% from June, and they imported $34.6 billion worth, a 3.1% gain.

The resulting merchandise trade surplus amounted to $3.9 billion in July, down from a revised $4.1 billion in June and $4.4 billion in May.

Exports were up for the third consecutive month, and imports for the second. This marked a turnaround from the considerable downward movements earlier this year.

Canada's merchandise trade surplus with the United States fell from $8.0 billion to $7.9 billion as imports rose faster than exports. At the same time, the merchandise trade deficit with all other countries widened from $3.9 billion in June to $4.0 billion.

Exports: Machinery and equipment, energy, industrial goods lead growth

July's largest boost came from machinery and equipment, where exports were up 4.9% to $8.1 billion. The sector advanced primarily on the strength of aircraft and other transportation equipment, which moved up 15.3%.

Within aircraft and other transportation equipment, exports of aircraft, engines and parts surged 27.1%, reflecting recent significant production gains in the industry. Also supporting July's growth were gains in industrial and agricultural machinery (+4.2%), and other machinery and equipment (+1.2%).

Machinery and equipment exports have been on an upward trend since mid-2003.

Canadian companies exported $7.8 billion worth of energy products in July, up 4.6% from June, their second consecutive monthly gain. The bulk of the strength came from crude petroleum, where exports surged 6.8% to a record high $3.5 billion. Natural gas exports, which had been on a downward trend since October 2005, increased 4.0%, while other energy products posted their second straight monthly growth, edging up 1.6%.

Exports of industrial goods and materials advanced for a third straight month, rising 3.7% to a record high $8.1 billion. Metals and alloys, the largest component of the sector, posted their fifth consecutive advance on the strength of record-setting performances by nickel and alloys (+100.5%), copper and alloys (+3.6%), zinc and alloys (+5.2%), and other iron and steel and alloys (+16.9%). In July, nickel and alloys prices jumped 21.8%.

Exports of chemicals, plastics and fertilizers rose 2.1%, while exports of metal ores halted three consecutive monthly increases with an 8.0% drop.

In the agricultural and fishing products sector, exports rebounded following three straight monthly declines, rising 9.8% in July. The bulk of the growth in the month came from products such as rapeseed, crude vegetable products, and other food, feed, beverage and tobacco.

Other consumer goods exports moved up 7.5% following a 2.6% decline in June. This sector, which accounts for less than 4.0% of total exports, has remained relatively unchanged since mid-2003.

On the downside, exports of automotive products fell 7.2% to $6.3 billion in the wake of a significant drop in sales of automotive products to the United States in June. The largest contributors to July's decline were passenger autos and chassis (-10.3%), and motor vehicle parts (-6.1%). Trucks and other motor vehicles exports edged down 1.2%.

Except for a small increase in June, exports of forestry products have been falling since February this year, declining 1.2% in July. Wood pulp and other wood products fell 3.0%. Newsprint and other paper, which dropped 1.4%, have been on a declining path since early 2001 because of falling demand for newsprint in the United States, coupled with the rising popularity of the internet in disseminating news. Lumber and sawmill products declined for the sixth straight month in July (-0.5%) in the wake of falling construction spending in the United States.

Imports: Automotive products, machinery and equipment spur broad-based growth

July's gain in merchandise imports was broad-based as all commodity groups except for forestry products and other consumer goods were on the rise.

The biggest boost came from the automotive products sector, where imports increased 11.2% to $7.3 billion, their highest level since December 2002. After two consecutive months of declines, imports of trucks and other motor vehicles surged 19.4% to a record high $1.6 billion.

Imports of passenger autos and chassis increased 17.5% following two consecutive contractions. Motor vehicle parts (+3.7%) posted their second monthly gain. Imports of automotive products have been virtually flat since mid-2004, as trucks and other motor vehicles have risen, while motor vehicle parts have declined, and passenger autos and chassis have been relatively stable.

Energy imports edged up 0.7% as prices rose 4.6% while volume fell 3.8%. A 1.1% rise in crude petroleum imports was partly offset by a 0.2% decline in other energy products.

Imports of machinery and equipment moved up 1.3% to $9.5 billion following a small drop in June. The volume of imports in the sector has been rising steeply since early 2003, coinciding with the rising value of the Canadian dollar. July's gain was supported by advances in industrial and agricultural machinery (+3.6%) and by other machinery and equipment (+1.6%), and office machines and equipment (+1.0%).

A 4.2% decline in imports of aircraft and other transportation equipment, following two consecutive increases, partly offset the overall growth of the sector.

Imports of industrial goods and materials rose 1.2%, recouping about half the ground lost in June. This came on the heels of increases in manufacturing activity in Canada.

Imports of agricultural and fishing products registered their fifth consecutive gain, rising 3.8% to a record high $2.0 billion. Contributing to the surge were fruits and vegetables (+1.9%) and other agricultural and fishing products (+4.6%).

On the negative side, imports of forestry products fell 5.4%, while other consumer goods slipped 0.5%.

Available on CANSIM: tables 228-0001 to 228-0003 and 228-0033 to 228-0046.

Definitions, data sources and methods: survey numbers, including related surveys, 2201, 2202 and 2203.

The July 2006 issue of Canadian International Merchandise Trade, Vol. 60, no. 7 (65-001-XIB, free) is now available from the Publications module of our website. The publication includes tables by commodity and country on a customs basis. Current account data (which incorporate merchandise trade statistics, service transactions, investment income and transfers) are available quarterly in Canada's Balance of International Payments (67-001-XIE, free).

Merchandise trade data are available in PDF format on the morning of release.

For more information on products and services, contact the Marketing and Client Services Section (toll-free 1-800-294-5583). To enquire about the concepts, methods or data quality of this release, contact Jafar A. Khondaker (613-951-9786), International Trade Division.

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