Canada’s trade surplus: Running on fumes

The trade surplus increased in August:

Canadian companies exported merchandise worth $38.7 billion in
August, up 0.3% from July, with strong gains in industrial goods and
materials and automotive products. On the other hand, imports
declined 0.6% to $34.5 billion, following two consecutive monthly
increases.

The resulting merchandise trade surplus amounted to $4.2 billion, compared with $3.9 billion in July.

The surplus with the United States, Canada’s largest trading
partner, moved up from a revised $8.1 billion to $8.2 billion. Both
exports and imports declined, but imports fell more than exports.

At the same time, the nation’s trade deficit with countries other
than the United States narrowed from $4.2 billion in July
to $4.0 billion.

But the writing seems to be on the wall:

That said, not [everyone] thinks Canada’s surplus will continue to expand.

“Over the next two months we expect the trade surplus to fall quite
sharply to the $2.5-billion to $3-billion range reflecting the recent
sharp drop in energy prices,” said Ted Carmichael, chief economist at
J.P. Morgan Securities Canada, in a research note.

The net-of-energy trade balance has now gone negative, so energy exports account for the surplus we have.

Bal_energy

If oil prices continue to drop, then the trade surplus will start to fall soon.