The global semiconductor shortage and severe winter weather in the US contributed to the falls in exports and imports in February, with the auto sector hit especially hard. Those shortages look set to persist for some time, but the weather distortion will be reversed in March and the latest business surveys imply that external demand is improving.
Semiconductor shortage weighs on trade
- The global semiconductor shortage and severe winter weather in the US contributed to the falls in exports and imports in February, with the auto sector hit especially hard. Those shortages look set to persist for some time, but the weather distortion will be reversed in March and the latest business surveys imply that external demand is improving.
- Canada maintained a rare goods trade surplus in February, down only slightly to $1.0bn, from $1.2bn, but exports and imports both declined. The 2.7% m/m fall in exports would have been worse were it not for an 18% m/m surge in energy exports. While energy exports benefitted from higher prices, particularly for natural gas following the supply outages caused by the extreme weather in the US, exports in most other sectors weakened. The sharp falls in exports of aircraft and metal ores, of 20% m/m and 27% respectively, were always likely as the one-off factors that boosted those sectors in January reversed. But the 10% slump in auto exports, and the 4.4% fall in electronic & electrical equipment exports, reflect the disruption caused by the global semiconductor shortage.
- The same issues contributed to the 2.4% decline in imports and suggests we should not read too much into the falls in imports of machinery & equipment, electronics & electrical equipment and motor vehicles, which would normally be a sign of weakening domestic demand.
- In volume terms, exports fell by a larger 3.8% m/m in February, while imports fell by 3.5%. Nevertheless, the prior strong gain means export volumes are on track to do much better than imports in the first quarter. If both were unchanged in March, export volumes would rise by 9% annualised, while imports would decline by 6%, with net trade therefore boosting GDP growth, which we expect to be 5.5% annualised.
- The business surveys imply that the outlook for exports has improved, with the export orders components of both the Markit manufacturing PMI and the CFIB Business Barometer up strongly in March. (See Chart 1.) That probably reflects the fast-recovering US economy and implies that exports should do better in the coming months, and therefore help to offset some of the negative impact of the third wave of COVID-19.
Chart 1: Surveys of Export Orders & Foreign Demand
Source: Markit, Refinitiv
Table 1: International Merchandise Trade Indicators
Selected Indicators (%m/m)
Terms of Trade
USD per CAD
Stephen Brown, Senior Canada Economist, +1 416 874 0514, firstname.lastname@example.org