Thanks largely to surging oil prices, Canada’s trade surplus rose sharply in May, according to new data from Statistics Canada.
The national statistical agency reported that the merchandise trade surplus grew to $5.3 billion in May from $2.2 billion in April.
In a research note, BMO Capital Markets said the stronger surplus is the largest since the financial crisis (August 2008), and marks the fifth straight month in surplus.
The value of exports increased by 4.1%, which was driven by a 5.7% gain for energy products, while imports declined by 0.7%.
“Exports reached a new all-time high in the month ($68.4 billion) as the energy segment once again benefited from higher prices and uncertainty surrounding global oil supply,” National Bank Financial Inc. said in a research note, adding that this pushed the energy trade balance to a new all-time high.
Energy products accounted for almost a third (29.8%) of total exports in May, StatsCan said, noting that this was energy’s highest share ever.
CIBC World Markets said there were also signs that “non-energy exports are benefiting from international demand for non-Russian minerals/metals, with Canadian companies able to fill in some of the gaps within the global supply chain and benefiting from the initial spike higher in related prices.”
Notably, potash exports reached record levels in May amid high demand for fertilizer to replace supply from Russia and Ukraine.
Separately, StatsCan reported that the deficit in services trade came in at $1.1 billion in May, down slightly from $1.3 billion in April.
Looking ahead, the trade surplus is expected to narrow once again.
“Today’s sharp widening in the Canadian trade surplus could be as good as it gets for now, given that energy prices have fallen relative to where they stood in May and that imports will likely rebound alongside the reopening in China,” CIBC said.
It also noted that some of the rise in non-energy exports “could persist if Canadian companies are able to raise production and offset some of the holes left in the global supply chain by the sanctions imposed on Russia following its invasion of Ukraine.”