Canada: Trade Fades in February After January’s Jump

Canada’s international merchandise trade surplus narrowed in February, coming in at $422M from a downwardly revised $1.2B in January. Exports fell 2.4% to $65.0B in February, largely reversing the 3.5% advance that started the year. All product categories experienced declines except farm, fishing and intermediate food product exports (+2.1%). Following a 3.6% jump in January, imports fell 1.6% in February to $64.6B, with 8 of 11 product categories posting declines.

Today’s trade release was weak across the board, but it was widely expected given January’s strength and the one-off nature of many of the gains that started the year. This continues to reinforce our view that growth is tracking in the 2.5% to 3% annualized range in the first quarter of 2023. Notably, this remains well above the Bank of Canada’s latest forecast for 0.5% real GDP growth in Q1. That said, ongoing financial market volatility and inflation which appears to be cooperating, at least for now, should help to keep the Bank of the sidelines for the foreseeable future.