Key points

• Canadian merchandise export growth paused in July after recent gains, though remains higher than last year. Newly announced tariffs will weigh on activity in future months.
• Strong performance in energy and metal shipments cushioned the ongoing decline in automotive exports.
• Shipments to non-U.S. markets hit record highs, largely propelled by gold exports to the U.K.

Exports in July remain upbeat from last year

Canadian merchandise exports posted a 2.3% drop in July, marking their first decrease in six months due to reduced volumes and lower prices for gold, oil, and natural gas.

Despite this monthly dip, performance remained strong compared to the previous year. Export values surged 22% year-over-year (y/y) and 13% year-to-date (YTD), with positive contributions from six of the eleven major sub-sectors.

Turning to sales at restaurants and bars, January was also a record month for Alberta, with sales reaching over $1.1 billion for a year-over-year increase of 9.5%.

January’s sales build on a strong performance last year that saw annual revenue rise by 5.9%.

The rise in the number of international visitors helps explain the increase in restaurant and bar sales, but it also suggests visitors from other parts of Canada and, of course, Albertans themselves are continuing to support the sector by eating out/ordering in.

As we’ve stressed before, while rising sales are a positive trend for the sector, there has also been upward pressure on operating costs. Unfortunately, this  could get worse, with the Iran war already increasing fuel prices and potentially causing food costs to rise even higher (thanks in part to spiking fertilizer prices).

*The data in today’s Twenty-Four have been adjusted for regular seasonal variation.

Non-U.S. exports reach new monthly peak

The upward trajectory of exports heading to non-U.S. markets, a pattern we have observed for some time, gathered further momentum over the past year. Following a record second-quarter performance, non-U.S. exports surged nearly 50% y/y in July, setting a new all-time monthly high since tracking began in 1997.

Driven largely by the sharp rise in gold shipments, exports to the U.K. alone accounted for 84% of YTD growth across non-U.S. destinations. China followed as the second-largest contributor, buoyed by increased demand for energy products.

What’s to come?

Export activity has been a key driver in strengthening the Canadian economy beyond expectations during the first half of the year. However, as we look to the second half, the newly introduced tariffs targeting $26 billion worth of Canadian goods are anticipated to exert substantial downward pressure on exports, particularly across industrial machinery, wood, furniture, and plastic products, in future months. 

On the other hand, momentum on non-U.S. shipments are expected to slow in line with easing gold prices while the volume of oil exports is expected to be mostly capped given capacity constraints with the Trans Mountain pipeline already running at full capacity.

*All export data in today’s report are measured on a balance-of-payments (BOP) basis and have been adjusted for seasonal variation.

Answer to the previous trivia question: There has never been a female Governor of the Bank of Canada.

Today’s trivia question: Who was Prime Minister when Labour Day became an official holiday in Canada?