Canada: December Trade Data Point to Underlying Weakness

Canada’s international merchandise trade deficit narrowed in December, coming in at $160 million from a downwardly revised $219 million in November. Exports fell 1.2% to $63.0 billion, to lowest level since February 2022. The decline was concentrated in energy products (-7.6%). At the same time, imports also fell 1.3% to $63.1 billion in December. Imports of consumer goods led the charge lower (-6.4%). Today’s trade release left our tracking for the Canadian real GDP growth in Q4 broadly unchanged. At 1.6%, we continue to expect growth to come in above the 1.3% in the Bank of Canada’s January 2023 Monetary Policy Report (MPR). Today’s release doesn’t impact our call for the Bank of Canada to remain on hold before cutting by the end of the year.