April 18, 2008
Economy at a Glance - April 18, 2008
Canada's merchandise trade surplus bounces back in February
Canada’s merchandise trade surplus increased in February 2008 (to nearly $60 billion CDN), while the balance of trade in goods and services in the U.S. deteriorated (to nearly -$750 billion US). Canada’s trade surplus is the highest it has been in almost a year, dating back to March 2007. Over that intervening time period, the Canadian dollar has appreciated by about 15% versus the U.S. dollar.
The respective trade positions of the two countries are not supposed to be behaving the way they are. A big part of the explanation lies in energy demand. The price of energy has gone up over the past year and the volume of trade has proven inelastic. Therefore, Canada reaps a higher dollar return for its energy exports and the U.S. must pay a higher dollar premium for its energy imports.
As for U.S. trade problems, they can be summarized as follows. The U.S. has a high reliance on imported energy and there is no short-term way around this. Furthermore, the economic slowdown in the U.S., combined with the subprime mortgage catastrophe, has exposed another structural problem.
U.S. purchases of low-cost foreign consumer goods mainly from China, by way of Wal-Mart and its competitors are no longer discretionary. With low-income families (and many middle-income families as well) struggling to keep their heads above water, such purchases have become an essential means to acquire the necessities of life.
For more articles by Alex Carrick on the Canadian and U.S. economies, visit his blog and Market Insights.
Canada's Foreign Trade: The Merchandise Trade Balance - February 2008
Canada's Trade by Major Goods and Commodities - February 2008
