Canada’s Trade Balance Reaches 14-Year High on Soaring Energy Prices

Canada’s exports surged in May, particularly thanks to high energy prices. The country’s trade balance with the rest of the world reached a 14-year high. Exports rose 4.1% on high energy prices but also spurred by aircraft and potash sales. Imports fell 0.7% as consumer goods purchases became lower.

The trade surplus in May was calculated at C$5.3 billion, well above forecasts of C$2.4 billion and up from an upwardly revised C$2.2 billion in April.

High prices of energy has been the driving force that helped the country reach this level.

Canada’s energy exports rose 5.7% in May to C$20.4 billion, accounting for nearly a third of the country’s total exports, as global crude prices surged over Russia’s invasion of Ukraine and high consumer demand.

The overall value of Canadian exports is up more than 20% so far this year, though volumes are down 2.3%.

While the exports carried Canadian economy in the first half of 2022, there are concerns that the country is relying too much on commodity prices.

High commodity prices helped Canada weather a global economic storm, which threatens Canada’s G7 peers to go into recession. The picture could change for Canada later this year if prices start to drop.

Although the surplus is expected to go up again in June, the fact that commodity prices are falling would make the surplus narrow over the second half of this year.

Canada’s imports fell for the first time in four months in May as retailers imported less clothing, footwear and accessories, and pharmaceutical products.

The drop in consumer goods imports is considered more of a supply issue than a demand one, which would be bad news from an inflation standpoint.

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