Canada: Trade Balance Came over from the Dark Side in March

International merchandise trade surplus widened in March, coming in at $972 million from a downwardly revised deficit of $487 million in February. The primary driver of the widening in the goods trade surplus was a 2.9% decline in total imports to $62.6 billion. Meanwhile, exports fell a more modest 0.7% to $63.5 billion in March, largely on the back of a decline in exports of energy products (-5.9%).

On a quarterly basis, goods export volumes advanced 14.9% annualized in Q1 2023, while import volumes fell 1.6%—the third consecutive quarterly contraction. But we don’t think this means much for the path of interest rates, as the boon in Q1 net exports was largely expected in April. If anything, the ongoing weakness in import volumes, particularly in consumer goods and motor vehicles, suggests elevated interest rates may be weighing on household purchases heading into the middle of the year. This should provide more support for the Bank to maintain its pause on interest rates.