Overview
Canada's monthly goods trade position deteriorated in November as export values fell sharply, lifting the merchandise trade deficit to C$2.2 billion. Statistics Canada reported the November shortfall in goods compared with an upwardly revised deficit of C$395 million in October.
Details of the change
The increase in the November deficit was driven largely by a 24.4% decline in exports of metals and nonmetallic goods, a contraction led by a fall in shipments of unwrought gold. StatCan said large reductions in unwrought gold exports were observed to Britain, the United States and Hong Kong. In volume terms, total exports were down 0.9% for the month.
Exports of motor vehicles and parts fell 11.6% in November, which Statistics Canada described as the largest drop in that category in three years. Overall imports also edged down, but only marginally - total imports declined 0.1% to C$66.14 billion. The modest fall in imports was concentrated in motor vehicles and parts and in energy products.
Trade with the United States and other partners
Despite the headline deficit, Canada posted a merchandise trade surplus with the United States in November. Exports to the U.S. decreased by 1.8% while imports from the U.S. fell by a larger 5.4%, which lifted Canada’s merchandise trade surplus with the U.S. to C$6.6 billion in November from C$5.2 billion in October.
However, exports to the United States accounted for just over 68% of Canada’s total outbound shipments in November, down from 76% a year earlier. This shift reflects an ongoing reorientation of trade partners.
Shifts beyond the U.S.
Imports from countries other than the United States increased 7.8%, the highest rise on record in the current series, led by higher purchases from China and Germany. Conversely, exports to countries other than the United States fell 4.9% in November, widening Canada’s trade deficit with non-U.S. countries to C$8.8 billion from C$5.6 billion in October.
Market reaction and data caveats
The Canadian dollar strengthened after the release, trading up 0.32% to C$1.3511 to the U.S. dollar, equivalent to 74.03 U.S. cents. Yields on two-year Government of Canada bonds eased slightly, down 0.5 basis points to 2.4192%.
Statistics Canada noted that the November trade figures were delayed because information on Canadian exports to the United States was unavailable due to a 43-day government shutdown in the United States, which affected data collection for several months.
Commentary from Export Development Canada
"I do see the momentum moving in the right direction. Are we going to see results overnight? No," said Stuart Bergman, chief economist at Export Development Canada.
Bergman added that exports to the United States, which recorded their second monthly decline in November, are expected to continue to contract as exporters diversify into other markets. He cautioned that Canadian exports remain concentrated: almost 90% of exports go to the U.S., Britain, the European Union and China, and greater diversification is necessary.
What this means for sectors and markets
The November data show pronounced weakness in metals and motor vehicles exports, sectors that have driven much of the monthly decline. Energy product imports also contributed to the modest fall in total imports. Movements in the currency and short-term bond market were modest following the release, reflecting the data's direct but measured impact on financial instruments.
Note: All figures and characterizations above are taken from the official November trade report and related commentary released by Statistics Canada and Export Development Canada.