Canada, U.S. trade surge: the details

John Shmuel February 11, 2011 - 12:53 pm

In one economist's words, "wowsa!" was the only way to describe Canada's trade surplus for December.

The country posted a 9.7% jump in exports for the month, pushed higher on the back of energy products and lifting the monthly figure to $37.8-billion. In comparison, imports rose 0.7% to $34.8-billion, giving Canada an impressive $3-billion surplus.

It was a different story south of the border. While the U.S. trade deficit widened less than expected, it still hit its highest level in four months. The reason? Chinese imports. Goods brought in from the Communist country helped widen the U.S. trade deficit to a whopping $40.6-billion.

Below, are the trade data essentials.
CANADA:
Exports jump most in 30 years
"Every once in a while, an economic report comes along that just makes you (or at least some economists) say wow! And today's Canadian trade report for December fits that bill," Douglas Porter, deputy chief economist for the Bank of Montreal, said.

That is because the 9.7% rise in exports in December represents the biggest gain in 30 years. Just as impressive however was the jump in exports to the U.S., which saw their own 30-year high with a 10.8% gain.
What does it do to Canadian growth?
Boots it. Diana Petramala, economist for TD Economics, estimates net trade helped contribute 7.0 percentage points to economic growth in the final quarter of the year, led by a 27% annualized gain in exports. This is the largest contribution from net trade since 1998, and puts some upside risk to TD's estimate for fourth quarter real GDP growth of 2.3%.

The huge leap in exports to the U.S. suggests the recovery there is picking up steam, obviously lifting Canada up along with it, While Canada is also benefitting for a stronger global economy.

What's driving exports?
The simple answer here is energy-related products, which saw a 25.1% spike in December. But gains were actually experienced across the board.

"The mammoth gains in exports were in both prices and volumes (mostly volumes), and were spread across many categories," said Mr. Porter of BMO. "The biggest advance was in energy, which flared up 25%, as prices bolted higher, U.S. demand was strong on unusually cold weather and the new pipeline continued to boost sales. Non-energy sales were strong as well, with farm goods, forest products, industrial goods and M&E all posting gains of 7%-to-10%."

There was one laggard however" automobiles. Auto exports were essentially flat for December, though Mr. Porter said that could change in the future.
"Just wait until U.S. auto sales recover in a more meaningful fashion," he said.

Will it last?
"The big question is whether this was a one-month wonder, or a sudden shift to a new higher plane for Canadian exports," said Mr. Porter. His view, however, is that it is more likely the latter. "It appears that the upswing in U.S. spending is indeed providing a sizeable boost for exporters, at long last," he said. "This strong year-end performance points to a solid December GDP result, and has prompted an upward revision to our call on Q4 growth (to 3.0%) and for 2011 (to 2.8%)."

http://business.financialpost.com/2011/02/11/canada-u-s-trade-surge-the-details/