Data released on Thursday showed an unexpected goods trade balance deficit of 0.04bn in November after a surplus of 1.3K in the prior months. Analysts at CIBC point out that while the goods trade balance deteriorated slightly, the deficit in services narrowed to more than offset that move, with services exports rising during the month but imports declining. The overall trade deficit narrowed modestly to -$1.5bn in November, from -$1.9bn in the prior month, they reported.

Weakness in import and export could be a sign of weakening domestic and global demand

“Canada's goods trade balance dipped a toe into deficit waters in November, with the $0.04bn shortfall coming against consensus expectations for a modest surplus of $0.5bn. However, with exports and imports both declining by similar magnitudes over the month, the surprise deficit stemmed mainly from a downward revision to energy exports in the prior month which dramatically narrowed the surplus for October (now $0.13bn relative to $1.21bn first reported). The weakness in import and export volumes in November could be a signpost of weakening domestic and global demand, as well as the continuation of supply disruptions in some areas.”

“Weakness in exports and imports during November appear to largely reflect lower energy prices and monthly volatility within areas such as pharmaceutical products. However, there are some signposts of weakening global and domestic demand as well, particularly the decline in imports of toys and games suggesting that more discretionary goods spending is weakening in line with the rise in interest rates.”