Despite energy exports, Canada posts trade deficits

July 11, 2012

EDMONTON, AB, Jul 11, 2012/ Troy Media/ – Alberta’s wealth is largely attributable to energy exports, whether it’s the investment necessary to get it out of the ground, the royalties that roll into the provincial government’s coffers or the corporate spending accounts fuelling Calgary Stampede this week.

But all of that energy flowing south isn’t enough to push the national balance in merchandise trade positive. According to Statistics Canada merchandise trade data, the country’s merchandise trade balance remained negative in May.

Imports hit a seasonally adjusted $39.7 billion; about $800 million more than what was exported.

Since 2008, Canada has recorded the occasional merchandise trade surplus, but it has been predominantly negative (prior to the recession Canada was recording a regular surplus of around $3 billion monthly).

Nationally, the trade deficit has been persisting for some time, while in Alberta the trade surplus hit $5.6 billion in May (provincial figures aren’t seasonally adjusted). Energy accounts for the bulk of Alberta’s surplus and it was down slightly that month, at $5.6 billion from $6 billion in April.

Exports are a function of price (which can be volatile) and volume. It follows that the surplus will likely increase, perhaps substantially, as more projects come online.

Merchandise trade only tracks part of Canada’s trade relation with the rest of the world. Trade also occurs in services, of which royalties paid for intellectual property constitute a large portion and, once they’re included, Canada records a pretty large deficit. Canada’s total deficit has been running at about 3 per cent of GDP since 2008.

As energy projects and other mining projects come to fruition, Canada’s deficit may be erased provided prices remain strong. Otherwise something is going to have to give, with the dollar either weakening or industry becoming more efficient.

| ATB Financial

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