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Data released on Wednesday showed the merchandise trade surplus of Canada narrowed more than expected in February, to CAD 1.04 billion. Analysts at the National Bank of Canada, point out chip shortages hit goods trade during February.  

Key Quotes:

“The recovery in international goods trade went into reverse in February as shortages of semi-conductor chips used to produce motor vehicles (among other things) forced many auto assembly plants in North America to reduce or stop production. As a result, total trade (exports + imports) in the auto sector fell no less than 8.8% in the second month of the year. Statistics Canada expect further drops in coming months.”

“Exports of metal and non-metallic mineral products also fell sharply as gold transfers within the banking sector eased. Alternatively, international shipments of energy products continued to swell, reaching a 14-month high of C$9.5 billion.”

“Apart from boosting some categories of exports, rising commodity prices also translated into improved terms of trade. The latter now sit at their highest level since August 2014.”

“Canada’s trade surplus with its southern neighbor reached its highest level since 2008 in February. The “deep freeze” in the Midwest certainly played a part in that, but generous fiscal handouts from Washington also helped. Rising household income in the U.S. is no doubt contributing in boosting demand for Canadian wares.”