Both US And Canada Record Foreign Trade Improvements
"In a somewhat unusual turn of events, both the U.S. and Canada recorded improvements in their foreign trade positions in November. In the past, they have often moved in opposite directions," reported by Reed Construction Data.
The article said "In Canada’s case, the better result was mainly due to a higher trade surplus with the United States. For the U.S., the progress resulted from better export sales to emerging nations.
Canada’s goods trade surplus with the U.S. improved to $36 billion in November from $21 billion in October. A low was reached of +$18.8 billion in July of last year. Canada also recorded weak surpluses with the U.S. during the recession, dropping down to $19.2 billion in May 2009.
It wasn’t so much that Canada’s goods export sales (+0.6%) to the U.S. increased by a lot in the latest month, according to Statistics Canada. Rather, it was the fact that Canada’s goods imports (-5.1%) from the U.S. declined significantly. Some Canadian auto plants that would have normally reached out for U.S. parts were temporarily closed to prepare for new 2011 models.
Where the most significant gain in Canada’s exports to the U.S. occurred was in crude petroleum (+12.5). A higher world price for oil was a factor. Oil has moved above $90 USD per barrel.
Exports of natural gas were down for the fourth month in a row. Gas prices remain in a sad funk. The development of new shale gas sites has increased the supply in the U.S. The Mackenzie Valley natural gas pipeline has just been given a go-ahead from the National Energy Board after decades of environmental hearings. The irony is that the timing may not be propitious. Projected revenue may no longer warrant the $16 billion investment that would be required.
There were strong levels of precious metal exports in November, with the prices of silver and gold at or near record highs. There was also a record high level of iron ore exports in the month. This is a product that Canada is supplying to emerging nations to help with steel production that is going into massive public works projects and surging automotive and appliance demand.
The improvement in the U.S. trade picture, as reported by the Census Bureau in partnership with the Bureau of Economic Analysis, was mainly manufacturing led. Aircraft sales have recovered nicely with the uptick in world airline passenger traffic. It has been widely reported that Seattle-based Boeing recorded a three-fold increase in plane orders in 2010 versus a depressed 2009.
Helped by a U.S. dollar that has exhibited some downward inclination against a basket of currencies, machinery and equipment sales for both construction and agricultural purposes have been strong to breakout nations. The world recovery has been accompanied by reduced reliance on and less upward lift to the greenback in its role as chief reserve currency and safe harbor.
Improved factory production, much of it destined for markets outside the country, has contributed significantly to the U.S. economic recovery in its early stages. The most recent purchasing managers’ index from the Institute of Supply Management indicated growth in U.S. manufacturing activity for the seventeenth consecutive period in the latest month of December.
The benchmark U.S. trade figure also includes services. (In Canada, attention focuses mainly on the merchandise trade balance which is goods only). U.S. travel exports were +10.5% year over year in November while travel imports were only +2.5%. Foreigners visiting the U.S. are deemed to be engaging in an export activity. This helps to explain why leisure and hospitality employment has been one of the liveliest sectors for job growth since the recession’s end.
On the import side, the U.S. continues to struggle with its foreign oil dependency. Increases in global spot prices contributed to the value increase in U.S. total imports in November.
Based on October and November results, the U.S. foreign trade deficit in the final quarter of last year will almost assuredly average less than in the three preceding months, July through September. That means foreign trade will provide a boost to U.S. gross domestic product (GDP) in Q4 2010. It will achieve this by taking away less from the bottom line of the GDP tally.
With the total merchandise trade deficit falling to almost zero in November, there will be a similar effect in Canada. This may be good news, but it’s still a far cry from what’s needed longer term. Going forward, Canada requires a continuous record of improvement in trade whereby the balance returns to pre-recession surpluses of $50 billion plus on a consistent basis."