Canada’s trade surplus hit its second-highest level ever in April thanks to surging exports, Statistics Canada said Friday.
Economists said the strength of the numbers, together with an improving global economy, suggests that Canada is poised to see a “very impressive” second quarter.
StatsCan said the surplus hit $7.6 billion — $1 billion less than the record set in January 2001. The figure is also much higher than the $6.3-billion surplus that economists had expected. Exports ran up 4.4 % to $36.6 billion in April, growing at more than six times the pace of imports. Imports totalled $29.1 billion, a gain of 0.7%.
The agency said April’s export growth was fuelled by strong international demand and high prices for most industrial commodities. Contributing to the gains were higher exports of aircraft, industrial machinery, passenger automobiles and petroleum and coal products. As for imports, the agency said declines in automotive and agricultural products offset gains in most other sectors.
Exports to the United States grew 3.3% to $29.4 billion while imports from south of the border rose 0.6% to $20.3 billion.
Ivana Rupcic, economist with the Royal Bank Financial Group, said $7.6 billion in April, far outstripping expectations of a $6.3 billion surplus. “More importantly, the details also look good,” Rupcic said in a report.
“Taking out price effects and looking at volumes, exports expanded at a very solid 2.2%, while imports declined by 0.4%. Since it is these real numbers that are important for overall growth, this translates into a huge contribution to second quarter numbers from net exports,” Rupcic said. “If we see anything similar to this during May and June, the impact would indeed be unprecedented.”
BMO Nesbitt Burns chief economist Sherry Cooper noted that demand for Canadian products remains robust and the trade surplus has surged to near record levels. “As well, there is evidence that spare capacity might be evaporating faster than the Bank of Canada had assumed,” she said. “The chance of a rate hike in September has increased.”
Marc Lévesque, senior economist at TD Bank Financial Group, said the ongoing surge in exports suggests that the adjustment to the stronger C$ is occurring sooner and faster than even the most optimistic of forecasters could have anticipated.
“This morning’s trade report is bound to start to rattle the thinking at the Bank of Canada – and although we are still betting on September as the date of the first rate hike, July’s odds are certainly rising,” he said in a report.
“Put simply, it will now be very difficult for the central bank to continue to state that data are unfolding in line with the expectations spelled out in the Monetary Policy Report, which had the domestic economy alone in carrying the growth torch.”
In another report, StatsCan said labour productivity rose 0.4% between January and March, compared with a year earlier. It was the first quarter-to-quarter gain in a year as the agency noted that productivity fell during last year’s second quarter and was virtually flat during the third and fourth quarters.
Higher productivity, measured by production per hour worked, occurs when gross domestic product increases faster than hours worked.
Cooper said that while this was the best quarterly performance in a year, it still left productivity unchanged from year-ago levels, “which is miles behind the recent U.S. pace.”
“U.S. labour productivity in the business sector zoomed 5.6% in the past four quarters,” Cooper said in a report. “While the massive productivity gap is poised to narrow — as U.S. employment growth gathers speed and Canadian output growth gears back up — the chasm at the start of 2004 means that U.S. productivity growth is poised to outstrip Canada’s pace for the fourth consecutive year.”