Canadian trade recovers to within 5% of pre-pandemic levels

Canadian trade with the rest of the world continued its recovery to more normal levels as the global economy rebounded from Covid-19 lockdowns.

Merchandise exports rose 11.1% in July, adding to a 20.5% gain in June, Statistics Canada said Thursday in Ottawa. Imports increased 12.7% in July, after gaining 20.3% in June. Combined, exports and imports have increased 35% since falling to a decade-low in April, leaving them 5% shy of pre-pandemic levels.

The figures will bolster confidence in Canada’s rebound, though economists caution a full recovery is far from assured. While global trade has been robust in some sectors like autos, other industries are still languishing, including travel.

“July’s trade data joins other indicators in confirming that Canada’s recovery has remained intact,” Omar Abdelrahman, an economist at Toronto-Dominion Bank, said in a report. “However, notable headwinds mean that the road forward for both is mired with uncertainty. For one, growth in services trade, as evidenced by today’s report, is expected to remain restrained.”

Fragile Services

Service exports are still down 23% from pre-pandemic levels, compared with 6% for merchandise exports. On the imports side, services are still 33% lower than February levels, versus 4.1% for goods.

The quicker rebound in imports caused the country’s merchandise trade deficit to widen to C$2.45 billion ($1.87 billion) in July, from a revised C$1.59 billion in June. Economists had expected a deficit of C$2.5 billion.

Motor vehicle exports have already surpassed pre-pandemic levels, as have shipments of consumer goods, which could foreshadow an upcoming dip.

“There is a risk of a significant slowdown in exports in August–September, given that the volume of auto exports is now 10% above the pre-pandemic February level,” Nikita Perevalov, an economist at Scotiabank, said in a report.