Forestry Products contribute to Canada’s trade surplus

March 9, 2021

By: The Working Forest Staff

Canada posted a trade surplus of $1.4 billion in January, the first since May 2019, owing to a sharp 8.1% increase in merchandise exports. It was also the largest surplus since July 2014. Imports rose 0.9% in January compared with the previous month.

Chart 1 
Merchandise exports and imports

To explore the most recent results of Canada’s international merchandise trade in an interactive format, see the International merchandise trade monthly interactive dashboard.

Widespread export gains

Total exports rose 8.1% in January to $51.2 billion, with increases in all product sections. This was the largest percentage increase since the rebound in the summer of 2020 that followed the easing of restrictions following the first wave of the pandemic. Excluding the strong fluctuations in 2020, the January increase was the largest since August 1995. Approximately one-third of the increase in the value of exports was driven by price growth. In real (or volume) terms, exports were up 5.1%.

Exports of aircraft and other transportation equipment and parts rose 72.3% in January, mainly on atypical growth in aircraft exports, which more than doubled. A Canadian airline retired a large number of aircraft from its fleet in January, resulting in the export of these used airliners to the United States. Although concentrated exports such as these are unusual for used aircraft, similar shipments are possible over the short and medium-term.

Exports of consumer goods were up 11.6% in January, primarily on higher exports of miscellaneous goods and supplies. This category, which includes a wide range of goods, rose by $437 million in January, the largest increase in five years, on higher exports of gold bars to the United States. This type of bar, sold at the retail level to individual investors, is classified within consumer goods, not metal and non-metallic mineral products, which normally includes gold exports to foreign financial institutions. The increase in exports of gold bars in January coincided with higher demand in the United States for this type of investment product.

Exports of energy products rose 5.9% in January, mainly on higher crude oil exports (+9.0%). Higher prices and volumes both contributed to the growth in crude oil exports in January. While volumes were above pre-pandemic levels, prices still lagged, despite the monthly increase.

Exports of forestry products and building and packaging materials (+10.7%) also contributed to widespread growth in January. The increase was largely attributable to lumber exports (+30.4%), which reached a record-high $2.1 billion in January. Since April 2020, exports of lumber have risen every month except one, mainly on strong price growth. As explained in the most recent Industrial product and raw materials price indexes releases, demand for lumber has been rising consistently for several months. In January, although prices rose again, the increase was largely attributable to higher volumes. Year over year, the value of lumber exports has more than doubled.

Chart 4 
Canadian exports of lumber and other sawmill products

Higher imports of refined petroleum products

Following two consecutive months of decline, total imports increased 0.9% in January to $49.8 billion. Imports rose in 7 of the 11 product sections. In real (or volume) terms, imports were up 1.0%.

Imports of electronic and electrical equipment and parts (+2.9%) also contributed to the increase in January. Imports of electronic and electrical parts and of computers and computer peripherals posted the largest increases.

United States behind the gain in total exports

Exports to the United States rose 11.3% in January to $37.2 billion, the highest value since September 2019. The spike in exports of aircraft, gold bars, crude oil and lumber was largely due to stronger trade with the United States. Following the steep declines in the spring of 2020, exports to the United States had remained below pre-pandemic levels. For the first time in January, exports to the United States were higher than February 2020 levels.

Imports from the United States edged up 0.4% to $31.0 billion. As a result, Canada’s trade surplus with the United States over doubled from $2.5 billion in December to $6.2 billion in January. This was the largest surplus since September 2008.

When the average exchange rates of December and January are compared, the Canadian dollar gained 0.5 US cents relative to the American dollar. This was the fourth consecutive monthly increase for the Canadian dollar.

Exports to countries other than the United States, which reached a record high in December 2020, edged up 0.3% in January to $14.0 billion. Higher exports to Saudi Arabia (other transportation equipment) were largely offset by lower exports to the United Kingdom (aircraft, oilseeds, and gold).

Imports from countries other than the United States rose 1.7% in January. Imports from Switzerland (gold) and Nigeria (crude oil) posted the largest increases.

As a result, Canada’s trade deficit with countries other than the United States widened from $4.5 billion in December to $4.8 billion in January.

Revisions to December merchandise export and import data

Imports in December, originally reported as $49.0 billion in the previous release, were revised to $49.4 billion in the release for the current reference month. Exports in December, originally reported at $47.3 billion in the previous release, were revised to $47.4 billion in the release for the current reference month.

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