Data released on Tuesday showed the merchandise trade balance turned to deficit in March in Canada. Jocelyn Paquet, an analyst at the National Bank of Canada explains imports expanded in March at the fastest pace in eight months on a strong gain for energy products.

Key Quotes:

“The merchandise trade balance moved from +C$1.42 billion in February (initially estimated at +C$1.04 billion) to -C$1.14 billion in March. Analysts expected a C$0.55 billion surplus. Nominal exports edged up 0.3% in the month, while nominal imports surged 5.5%.”

“The merchandise trade balance swung back into deficit territory in March as imports expanded at the fastest pace in eight months on a strong gain for energy products. The latter bounced back strongly as production at Texas refineries recovered following weather-related outages in February.”

“Total exports, meanwhile, advanced for a sixth time in the last seven months, moving 5.9% above their pre-crisis level.”

“The terms of trade continued to improve in the month and now sit at their highest level since February 2014. Turning to quarterly data, trade in goods likely added a few tenths to Q1 GDP growth as real exports (+1.6% q/q) expanded at a slightly steeper clip than real imports (+1.1%). A strong  expansion in import volumes in the machinery  equipment category (+2.9% q/q) bodes well for investment spending in the first quarter of 2021.”