International merchandise trade data for August 2024 reveals an expanding trade deficit driven by falling exports and modest gains in imports. According to the latest figures from Statistics Canada, exports fell 1.0%, marking the second consecutive monthly decline, while imports inched up 0.3%. As a result, the merchandise trade deficit widened to $1.1 billion, up significantly from a revised deficit of $287 million in July. This marks the sixth consecutive month of trade deficit, highlighting ongoing challenges in the global trade environment.
One of the key contributors to the downturn in exports was the significant drop in energy product sales, particularly crude oil.
Energy products exports fell 3.0% in August, with crude oil exports alone declining by 4.1%. In real terms, The export performance was slightly better, with volumes rising 0.1%, but lower prices played a dominant role in dragging down overall export values.
Beyond energy, several other key sectors experienced notable declines in August. Exports of forestry products and building materials dropped by 5.5%, reaching their lowest level since July 2023. Pulp and paper exports were particularly hard hit, falling 12.9%, driven by reduced demand from China and the United States.
Agriculture exports also saw a mixed performance, with certain areas showing strong growth. Canola exports surged by an impressive 72.9%, driven by robust demand from China, helping to offset some of the declines in other sectors. However, this was not enough to counteract the broader downward trend in merchandise exports.
On a more positive note, Canada’s motor vehicle sector showed signs of recovery in August. Exports of motor vehicles and parts rose by 5.1%, driven primarily by a 6.1% increase in passenger cars and light trucks. This rebound follows two months of sharp declines in the sector, as Canadian auto production struggled to meet demand. Despite the monthly gain, the sector remains down 19.9% compared to its peak in October 2023, reflecting ongoing production challenges in the Canadian automotive industry.
In contrast to declining exports, Canada’s imports grew modestly in August, rising by 0.3%. The increase was led by a 2.4% rise in imports of motor vehicles and parts, with passenger cars and light trucks seeing the most significant growth at 5.6%. This increase aligns with stronger production in the United States, where higher output of light trucks and SUVs boosted demand for Canadian imports.
Imports of industrial machinery, equipment, and parts also saw a notable increase of 3.8%, marking a recovery from the sharp declines seen in July. Machinery related to logging, construction, and oil and gas fields led the growth, though the sector remains down on a year-over-year basis.
Despite these gains, imports of consumer goods fell by 2.8%, partially offsetting the overall increase. The decline was driven by a 17.5% drop in pharmaceutical imports, particularly active pharmaceutical ingredients from Ireland.
The trade relationship with its largest trading partner, the United States, saw a downturn in August. Exports to the U.S. fell by 4.3%, largely due to declining energy exports. Meanwhile, imports from the U.S. increased by 0.9%. This shift resulted in a sharp reduction in Canada’s trade surplus with the United States, which dropped from $10.5 billion in July to $8.0 billion in August.
On the other hand, Canada’s trade with countries outside the United States improved. Exports to other nations surged by 10.3%, with higher exports of unwrought gold to the United Kingdom leading the charge. Exports to Switzerland also increased, further boosting trade with non-U.S. countries. Meanwhile, imports from countries other than the U.S. decreased by 0.7%, narrowing Canada’s trade deficit with these nations from $10.8 billion in July to $9.1 billion in August.
When combining goods and services, Canada’s overall trade deficit with the world also widened in August. Exports of goods and services together fell by 0.7% to $81.2 billion, while imports edged up by 0.1% to $83.6 billion. As a result, the total trade deficit grew from $1.8 billion in July to $2.4 billion in August, signaling a continued struggle in balancing Canada’s international trade flows.
It’s important to note that revisions to the July data show a slightly larger deficit than initially reported. July’s imports were revised upwards from $65.0 billion to $65.2 billion, while exports were revised downwards from $65.7 billion to $64.9 billion.
As Canada navigates the complexities of global trade, ongoing fluctuations in commodity prices, supply chain disruptions, and shifts in demand from key trading partners are likely to continue influencing the trade performance in the months to come.