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Surprise Trade Deficit Doesn’t Wildly Change Trend But Is A Drag On Q1 Growth

CANADA DATA
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  • As noted earlier, the merchandise trade balance surprisingly swung to a seasonally adjusted deficit of C$2.28bn in March vs consensus of a C$1.2bn surplus.
  • It followed a downward revised surplus of $0.48bn (initial C$1.39bn) in Feb, with the deterioration on the month led by exports of unwrought gold sliding 17.4% on the month after surging 70% to record highs in Feb.
  • Being only one month of data, it saw a limited deterioration when looking in % GDP terms, with the three-month balance shifting from 0% GDP to -0.2% GDP for the first deficit since Aug.
  • Add in the services deficit building slightly to C$1bn in March and the goods & services trade deficit widened from 0.3% to 0.6% GDP on a three-month rolling basis – see charts for context.
  • The volumes data for just goods meanwhile showed exports essentially flat at -0.1% annualized in Q1 but imports rising 2.4% annualized in a move that will act as a drag for Q1 GDP after net exports added a strong 0.6pp non-annualized to Q4 GDP growth of 0.2% non-annualized.
  • Recall that Tuesday’s monthly GDP data from separate industrial accounts tentatively indicated GDP growth of 2.5% annualized in Q1 contrary to the BoC’s forecast of 2.8%.
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  • As noted earlier, the merchandise trade balance surprisingly swung to a seasonally adjusted deficit of C$2.28bn in March vs consensus of a C$1.2bn surplus.
  • It followed a downward revised surplus of $0.48bn (initial C$1.39bn) in Feb, with the deterioration on the month led by exports of unwrought gold sliding 17.4% on the month after surging 70% to record highs in Feb.
  • Being only one month of data, it saw a limited deterioration when looking in % GDP terms, with the three-month balance shifting from 0% GDP to -0.2% GDP for the first deficit since Aug.
  • Add in the services deficit building slightly to C$1bn in March and the goods & services trade deficit widened from 0.3% to 0.6% GDP on a three-month rolling basis – see charts for context.
  • The volumes data for just goods meanwhile showed exports essentially flat at -0.1% annualized in Q1 but imports rising 2.4% annualized in a move that will act as a drag for Q1 GDP after net exports added a strong 0.6pp non-annualized to Q4 GDP growth of 0.2% non-annualized.
  • Recall that Tuesday’s monthly GDP data from separate industrial accounts tentatively indicated GDP growth of 2.5% annualized in Q1 contrary to the BoC’s forecast of 2.8%.