June 3, 2009
Economy at a Glance — June 4, 2009
Two improving news stories – U.S. retail trade and Canada’s Foreign trade
Prepared by Alex Carrick, Chief Economist, CanaData
Figures have just been released by government statistical agencies on both sides of the border with respect to U.S. retail trade (for April 2009) and Canada’s foreign trade (for March 2009). Neither set of numbers contains hop-up-and-down good news. Just the same, both reports are considerably less negative than they have been in the recent past.
For example, U.S. retail sales on a three-month moving average basis are still nearly -10% year over year. When the economy is functioning well, a figure of +5.0% is what one expects to see. Continuing job losses and belt-tightening to reduce credit balances are holding back shoppers. It is encouraging, however, that the year-over-year decline in retail spending has apparently bottomed out. It has hovered around -9.5% for the past four months.
Smoothed U.S. auto sector sales (vehicles and parts) have started to climb again. The upward movement is only barely perceptible, but it is a shift in the right direction nonetheless. Huge price discounts and other incentive programs, as well as government warranty guarantees, are the major reasons.
A similar pattern of flattening-out of declines is also occurring in many other retail sales areas, including “furniture and home furnishings” and “building material and supplies.” These indicate a housing market that is getting set for some level of revival and a future beyond the ill-health that it has experienced for the past three years.
In a similar fashion, the improving news for Canada is mixed with some qualifiers. Canada’s merchandise trade balance has moved into solid positive territory once again, after two months earlier this year when it was negative. Part of the reason for the improvement has been a drastic decline in some import categories. Fewer import purchases are the result of the recession and the pull-back in spending generally.
When all is said and done, however, it is better to have a merchandise trade surplus than a deficit. The former makes a positive contribution to Gross Domestic Product (GDP). The better prospects for Canada, in terms of the trade balance and commodity prices, are showing up in the recent appreciation of the loonie versus the greenback.
Plus there is some good news on the export front. The “agricultural and fishing” and “machinery and equipment” categories have recorded export increases to-date this year versus the same period last year. The largest export declines are in energy and auto products, where there are signs of relief coming for producers. Auto demand is modestly picking up in the U.S. In Canada, unit sales of motor vehicles in March rose 6.3% versus February. Canadian auto sales have been gradually creeping upward since late in 2008, after falling sharply (-30%) over the ten months before that.
The international price of oil has almost doubled since its lowest point – in the low $30 USD per barrel range at the start of the year – to nearly $60 USD now. This will help Canadian energy export sales, despite the fact that the U.S. economy is still shaky on its feet. This is very good news for Alberta and Newfoundland and the new “have” province in so many ways (i.e., oil and gas, uranium, potash and crops), Saskatchewan.
For more articles by Alex Carrick on the Canadian and U.S. economies, visit his blog and Market Insights.
Canada’s Foreign Trade: The Merchandise Trade Balance
Data source: Statistics Canada/Chart: Reed Construction Data – CanaData.
