OTTAWA - Canada's key trading sector disappointed for the second consecutive month in March, although analysts pointed to some encouraging signals in the exports picture that should contribute to economic growth.
The trade surplus rose slightly from the previous month to $351 — lower than the $500 million expected — due to the fact that imports fell more than exports, Statistics Canada said Thursday.
In terms of value, imports declined 0.6 per cent to $39.1 billion while exports slipped 0.4 per cent to $39.5 billion.
But the good news was that the loss was due to price effects. In volume terms, as exports rose almost one per cent and imports were up 0.6 per cent higher.
Economists had expected a bigger snap-back from February's weak data, but they pointed out that given the positive inflation-adjusted numbers and the strong hand-off from the final months of 2011, trade will be a net contributor to economic growth in the first quarter.
"In real terms, trade is likely to contribute strongly to Canada’s economic growth for the first quarter. Exports were up 10.1 per cent at annual rates compared to a 5.3 per cent increase in imports," said Jacques Marcil, a senior economist with the TD Bank.
Exports remain a key component of the economy, representing slightly more than 30 per cent of gross domestic output.
Analysts also expect the near-term outlook for future exports to improve, given strong sales expectations for autos in the United States.
Export Development Canada chief economist Peter Hall said he was not discouraged by the March report, even though, on the surface, the numbers appear poor.
"The bottom line looks really bad until you take away crude oil. We got slammed by crude oil, take that away and we're actually seeing a 2.7 per cent increase in nominal terms," he said.
"We've got industrial goods that were up, machinery and equipment was up and automotive hung in there and is still 12 per cent up on the year."
And with the summer driving season approaching, demand for crude oil should rebound, Hall said.
In March, exports to the United States — Canada's biggest market — fell 2.1 per cent to $28.7 billion, the third consecutive monthly decrease.
Meanwhile, imports from the U.S. declined 1.4 per cent to $24.1 billion as Canada's trade surplus with the Americans decreased to $4.6 billion in March from $4.9 billion in February.
Exports to countries other than the United States rose 4.5 per cent to $10.8 billion and imports increased 0.8 per cent to $15.1 billion, narrowing the trade deficit with those countries to $4.3 billion from $4.6 billion in February.
By sectors, energy exports fell 8.9 per cent compared with February as crude petroleum exports plunged 15.7 per cent. In volume terms, the setback was less severe.
Auto exports slipped slightly by 0.7 per cent, after February’s 11.3 per cent crash.
But many other industries posted gains. Industrial goods and materials rose 6.2 per cent, machinery and equipment was up 3.4 per cent and other consumer goods rebounded by almost 12 per cent.
South of the border, the U.S. trade picture suggested the economy was improving with both exports and imports posting gains in March.
Although the U.S. trade deficit widened, Global Insight economist Gregory Daco said the rebound in imports pointed to "sustained domestic activity" pulling in goods from abroad.
Here are a few details of the major investment deal coming soon between Canada and China, as well as a list of what CBC chief political correspondent Terry Milewski calls a "small blizzard of incremental agreements," signed in Beijing. <em>With files from CBC</em>. (Diego Azubel-PoolGetty Images)
Prime Minister Stephen Harper called the foreign investment promotion and protection agreement (FIPA) between Canada and China the first "comprehensive economic agreement" between the two countries. In fact, what was signed by Harper and Chinese Premier Wen Jaibao in Beijing is not the final deal, but a declaration of intent: Now it must be legally reviewed and ratified by both governments, which for Canada will mean a debate in the House of Commons. Once both countries complete this process, it will need to be formally signed to take effect. This deal will protect Canadians investing in China, as well as Chinese investors in Canada, from "discriminatory and arbitrary practices." Once in place, investors can have more confidence that rules will be enforced and valuable business deals will be subject to predictable legal practices. Harper told reporters in Beijing he "absolutely" expected that it will make a "practical difference." "The agreement does not override existing Canadian law in regard to foreign investment and foreign investment review," Harper said. "Those laws remain in place." Negotiations for this agreement took 18 years, and key players in manufacturing, mining and the financial sectors were consulted to get to this stage. It's not unusual for Canada to have this kind of an agreement with a trading partner. FIPAs are in force with 24 other countries that trade with Canada, and active negotiations are underway with 10 other countries, according to the government's announcement. (Diego Azubel-PoolGetty Images)
(AP Photo/Valentina Petrova)
- A new protocol, building on a 2010 agreement to restore Canada's market access to the Chinese market for Canadian beef following the 2003 BSE outbreak and resulting border closures, to allow industrial beef tallow (fat) to be imported for the first time in almost a decade. China used to be Canada's top export market for tallow ($31 million in 2002), and now Canada has a shot at a share of the $400 million in tallow China imports from around the world. - A memorandum of understanding (MOU) on canola research, to address a recent fungal disease in canola and rapeseed that threatens Canada's valuable trading relationship with China in canola. - On Tuesday, Chinese aquaculture feed company Tongwei announced it will increase its purchase of Canadian canola by up to $240 million per year by 2015. (DAVID BUSTON/AFP/Getty Images)
- A MOU between Natural Resources Canada and the Chinese Academy of Sciences to collaborate on scientific research on sustainable development of natural resources. The government release touts benefits including new technologies for resource firms, carbon emissions reduction strategies, reduced environmental impacts and natural hazards from resource development, and new opportunities for Canadian suppliers of equipment and services. - A MOU spelling out a "framework" for Parks Canada and China's state forestry administration to collaborate and share scientific expertise in the management of national parks, natural reserves and other protected areas. The agreement includes language around ecological restoration, conservation measures for endangered wildlife, wetlands development, and the preservation of forests and wetlands. (<a href="http://www.flickr.com/photos/47096398@N08/" target="_hplink">Flickr: eleephotography</a>)
- A continuation of the MOU, first signed in 2001 and renewed in 2006, on energy co-operation to "engage China on energy issues" through a Canada-China joint working group on energy co-operation, chaired by Natural Resources Canada and China's national energy administration, which is responsible for Chinese energy policy. The working group oversees joint research projects, exchange of expertise, and co-operation between energy companies in both countries, including the promotion of energy efficiency and renewables. It aims to both attract capital investment and improve market access for Canadian energy resources and technology. (MARK RALSTON/AFP/Getty Images)
- Approval of seven projects, valued at $10 million, under the Canada-China framework for co-operation on science and technology and innovation, including: a diagnostic kit for acute kidney injuries, a wind energy seawater desalination system, a waste heat-recovery system to help oil refineries consume less fuel, new solar cells for renewable energy panels, a real-time multi-sensor navigational tracking device for hand-held devices, a blue-green algae bloom warning system and "next generation" large-scale geographic information systems. - Two more calls for proposals, valued at $18 million ($9 million from each country) for joint research under the same framework. These proposals are for the development of "innovations with high commercial potential" in the areas of human vaccines and clean automotive transportation. The Canada-China joint committee on science and technology, made up of individuals from industry, academia and government, sets the priorities and oversees these projects. (To date, 21 projects ranging from nuclear power to AIDS drugs, to clean technologies for pulp and paper have received some $28 million in funding.) (TOSHIFUMI KITAMURA/AFP/Getty Images)
- A renewed MOU extending and modifying the Canada-China scholars' exchange program, which has seen 900 students travel between Canada and China since 1973. New eligibility rules and scholarships will be in place for the next round of competitions in 2012, including eight to 12 Canadian scholarships for Chinese professionals and 20 awards for Canadian university students. (<a href="http://www.flickr.com/photos/plutor/" target="_hplink">Flickr: Plutor</a>)