U.S. and Canadian Trade Figures

April 9, 2009

The U.S. goods and services trade deficit contracted 48.6% in January-February from a year earlier to $31.1 billion per month.  In February alone, the deficit was just $26.0 billion, 58% smaller than in February 2008.  Whereas net exports have been the major drivers of the German and Japanese recession, such continued to be a significant mitigating factor in the U.S. recession last quarter.  41.5% of the on-year shrinkage of the U.S. deficit in the first two months of 2009 came at the expense of OPEC, and commerce within the Western Hemisphere was responsible for an additional 34.5% of the deficit’s drop.  Japan made a 12.8% contribution to the U.S. trade improvement.  In contrast, China was responsible for just 7.1% of the improvement, causing China’s share of the entire U.S. deficit to swell to 48%, nearly half the total.  The firmer dollar has not yet impinged U.S. trade performance, and it in fact appears that an improved U.S. terms of trade (export/import price ratio) as a result of dollar appreciation may in fact be partly responsible for the rapid contraction of the deficit.

Oftentimes, Canadian and U.S. trade data, which get released at the same time each month, move in opposite directions.  This is not surprising. Since they trade heavily with one another, one economy’s gain tends to be the other’s loss.  The February figures were different.  Canadian trade swung from a deficit of C$ 1.15 billion in January to a surplus of C$ 126 million in February, reflecting monthly gains of 5.2% in exports and 1.1% in imports.  Export growth was paced by increases of 19.8% in automotive commerce and 8.4% in machinery and equipment, the very areas that had led a sharp deterioration of Canadian trade in prior months.  Canada’s surplus still compared very poorly with a C$ 4.5 billion in February 2008.  In the year to February, total imports fell 6.6%, but both energy exports (down 35.6%) and all other exports (down 10.5%) declined more sharply. Like Europe and Japan, trade continues to exert a heavy drag on Canadian GDP growth.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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