Some media reports suggest Canada, USA, and Mexico very close to signing new NAFTA agreement
According to the Conference Board of Canada report, exports rose in Feb. after decreases in Jan. Following two months of growth, mining, quarrying, and oil and gas extraction declined 2.7 per cent in Jan., the biggest decline since May 2016.
Oil and gas extraction declined 3.6 per cent in January following two months of growth. Unscheduled maintenance shutdowns at some facilities contributed to a 7.1 per cent drop in non-conventional oil extraction. Conventional oil and gas extraction was down for the third consecutive month, contracting 0.5 per cent on lower crude petroleum and natural gas extraction, according to the National Energy Board.
Mining excluding oil and gas extraction was down for the fourth month in a row, declining 0.8 per cent in Jan. Metal ore mining declined 2.2 per cent, as all industries were down with the exception of other metal ore mining. Non-metallic mineral mining was up 0.9 per cent following four months of decline, as growth in all other industries more than offset a 1.6 per cent decline in potash mining. Coal mining was up 0.6 per cent.
After eight monthly declines, support activities for mining and oil and gas extraction grew 2.5 per cent as a result of an increase in rigging services.
“Canada’s export numbers rose in February, but much of this was the return to normal after some temporary decreases in January. Exports have grown in the past 12 months, but not fast enough to contribute to overall economic growth,” said Conference Board of Canada’s Economist Robyn Gibbard.
The non-energy exports for gives a sense of how competitive Canada is in the global market. Non-energy exports were up by 0.7 per cent in Feb. but are unchanged from a year ago. That means that export-driven growth will remain elusive, particularly given that firms are showing a reticence to invest in Canada.
In real terms, exports were up by 0.6 per cent, while the economy as a whole grew by 2.7 per cent in the year to January. That means export growth is a drag on overall economic growth.
With softer consumer and investment spending expected this year, hopes for the trade sector to make a larger contribution to economic growth are looking less likely. That is particularly frustrating given the booming economy in our largest trading partner, the United States, and the relative weakness of the Canadian dollar. Hopefully an imminent agreement in principle on NAFTA will alleviate some of the risks facing Canada’s export sector,” concluded Gibbard.
Despite rising exports, Canada’s merchandise trade deficit grew from $1.9 billion to $2.7 billion in February, as imports grew even faster than exports.
The largest contributors to the import growth were energy products and motor vehicles and parts. Imports of motor vehicles and parts increased for the same reason as exports did. In January there were temporary plant shutdowns, so the February numbers represented a return to normal.
Some media reports suggest that Canada, the United States, and Mexico are very close to an agreement in principle on changes to the North American Free Trade Agreement. If true, that means a new agreement could possibly be ratified by the end of 2018, alleviating a major source of uncertainty for Canadian exporters.
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