Record-high export volumes push Canada trade surplus wider

Canada's merchandise trade balance in April widened by more than expected as export volumes reached an all-time high, surpassing their pre-pandemic levels.

The surplus rose to C$1.9 billion, from a downwardly revised C$231 million in March, with exports of gold, crude oil and vehicles increasing the most, Statistics Canada reported Wednesday in Ottawa. Economists were anticipating exports to exceed imports by C$550 million in April.

Total exports increased 2.5% in April after two straight monthly declines, while imports dipped 0.2% that month, a third consecutive monthly decrease. Stripping away the impact of prices, Canada exports grew 2.8%, while imports climbed 1%.

Data suggest exports remain one bright spot in the economy at the start of the second quarter. International trade and household spending spurred gross domestic product growth in the first three months of this year.

The stronger-than-expected economic momentum so far this year boosted the odds of another Bank of Canada rate hike as early as Wednesday after two straight meetings where rates were held steady at 4.5%.

Still, slowing imports in recent months may suggest waning momentum in the domestic economy as higher rates increasingly weigh on households and businesses. Imports of consumer goods, excluding pharmaceutical products, fell 0.3% in April.

In a separate release on Wednesday, Canada's labor productivity fell 0.6% in the first quarter, the fourth straight quarterly decline.

Growth in hours worked in the business sector accelerated to 1.4% in the first quarter, the highest quarterly growth rate since 2021.

Unit labor costs of Canadian businesses rose 1.3%, the fifth straight quarterly rise, due to the combined effect of the growth in average compensation per hour worked and the decreased productivity.