Canadian Trade Deficit Narrows Slightly in December, as Exports and Imports Fall

HIGHLIGHTS 

• Canadian merchandise exports fell 1.2% to $63.0 billion in December, while merchandise imports decreased 1.3% to $63.1 billion.
• Canada’s merchandise trade deficit narrowed from $219 million in November to $160 million in December.
• After removing price effects, export volumes were up 0.9%, while import volumes were down 2.0%.
• The decrease in nominal exports spanned 7 of 11 major commodity groups, led by considerable declines in the exports of energy and farm products.
• Exports to the U.S. edged down 0.1% to $47.3 billion in December, while exports to the rest of the world fell 4.5% to $15.7 billion.
• In annual terms, Canada’s merchandise trade balance posted a surplus of $20.1 billion in 2022, up sharply from a surplus of $4.6 billion in 2021.
• Over the near term, a cooling global economy will continue to be a headwind for export growth, though this should be somewhat offset by easing supply chain constraints.

EXPORTS AND IMPORTS BOTH FALL IN DECEMBER

Canadian merchandise exports fell 1.2% to $63.0 billion in December, while merchandise imports decreased 1.3% to $63.1 billion. In real or volume terms, the picture was more upbeat, with exports up 0.9% and imports down 2.0%.

Today’s data release indicates that trade contributed positively to economic growth in the fourth quarter of 2022, with import volumes falling much more steeply than export volumes. Over the near term, a cooling global economy will continue to be a headwind for export growth, though this should be somewhat offset by easing supply chain constraints.

CANADA’S TRADE DEFICIT NARROWS

Canada’s merchandise trade deficit narrowed from $219 million in November to $160 million in December. Breaking the numbers down, our trade surplus with the U.S. narrowed for the seventh consecutive month, moving from $7.1 billion in November to $7.0 billion in December. At the same time, our trade deficit with the rest of the world narrowed from $7.3 billion to $7.1 billion.

EXPORTS OF ENERGY AND FOOD PRODUCTS LEAD DECLINES

The decrease in exports spanned 7 of 11 product categories. Exports of energy products decreased 7.6% to $14.3 billion in December, the third straight monthly decline and the lowest level recorded in 2022. Crude oil exports contributed the most to the decrease, driven mainly by lower prices and the temporary closure of the Keystone Pipeline System that carries Canadian oil to the U.S.

Exports of farm, fishing and intermediate food products tumbled 9.9% to $5.3 billion in December, following three strong monthly gains. Despite the decline, exports of this product category surged by more than 20% in the fourth quarter, largely reflecting higher production in the most recent crop year.

On the upside, exports of motor vehicles and parts jumped 21.0% to $7.5 billion in December, the first increase in three months and the highest level since September 2020. This is another positive sign that the supply chain issues plaguing the auto industry continue to ease.

EXPORTS TO COUNTRIES OTHER THAN THE U.S. FALL

Exports to the U.S. edged down 0.1% to $47.3 billion in December, down for the sixth month in a row. At the same time, exports to the rest of the world fell 4.5% to $15.7 billion. Among Canada’s major non-U.S. trading partners, exports to China, the U.K, , and the EU were down, while exports to Japan, Mexico, and South Korea were up. The decrease in exports to China was driven by lower exports of oilseeds and canola, while the decrease in exports to the U.K. was led by gold.

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