In an otherwise grim month for exporters in May, Canada’s shrinking trade deficit with the world seemed to offer a glimmer of hope that the country had turned a corner.
But economists were quick to caution: Don’t be fooled by the gold.
Indeed, about the only thing that shimmered in Statistics Canada’s latest release of trade numbers was soaring exports of unwrought gold, silver and platinum. And the stunning rise in prices for the shiny metal has increasingly skewed Canada’s trade numbers in recent years.
May offered a stark example of that. Canada’s trade deficit with the world (a measure of how much more stuff we buy from other countries than sell to them) fell to $5.9-billion in May from a record high of $7.6-billion in April.
But after stripping out imports and exports of the gold category, Canada’s trade deficit widened to $10.3-billion.
“While the headline export number for May shows significant improvement from a grim April, this was mostly driven by volatile gold exports, where non-mineral product exports declined in the month,” wrote Alexandra Brown, North America economist at Capital Economics, in a note.
That distortion has become more pronounced since the end of 2022. Over that time, gold’s price doubled to a recent all-time high of US$3,397 an ounce, driving up the value of Canada’s gold exports. During that same period, the volume of exports of the shiny metal climbed by a much more modest 19 per cent, to 376 tonnes on a rolling 12-month basis in May.
As a result Canada’s export picture has enjoyed a shinier veneer of smaller trade deficits, and in some cases even trade surpluses, than would have otherwise been the case.
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