Skip to main content

The Globe and Mail

Weak global demand hurting Canadian trade flow

Global trade flows have been under growing pressure since the summer when Europe slipped back into recession, China downshifted and the United States continued to falter.

Issei Kato/Reuters

It's just the way it goes with trade: When the global economy stumbles, consumption slows, production falters, and the movement of goods everywhere suffers.

Global trade flows have been under growing pressure since the summer when Europe slipped back into recession, China downshifted and the United States continued to falter.

Tentative signs suggest the worst may be over as several key economies prepare to release trade figures for September this week. Canada, the United States, Germany, Britain, France and Australia are all to report.

Story continues below advertisement

Only one of them – Germany – is currently running a trade surplus.

The modest improvement in the global outlook isn't likely to come in time to make Canadian and U.S. trade numbers look any better.

Economists expect the trade deficit in both countries to have widened in September.

In Canada's case, the deficit could reach $1.6-billion, up from $1.1-billion in August, according to Royal Bank of Canada economist Paul Ferley. Exports continue to face strong headwinds because of the strong Canadian dollar and weaker demand in key markets for pretty much everything the country produces.

"Weak global demand is expected to keep non-energy export demand soft, limiting the overall gain in exports to a modest 0.5 per cent," he said in a research note.

It would mark the sixth consecutive month Canada has posted a deficit. RBC estimates the deficit will average $1.8-billion in the third quarter, compared to $1.2-billion in the second quarter. A deficit acts as a drag on economic growth.

In the U.S., the consensus is for the gap to grow to $45-billion (U.S.) in September from $44.2-billion in August. As in Canada, weak global demand is hurting U.S. exports. The drought is also eating into food and grain exports. And because the U.S. is a net oil importer, higher crude prices are pushing up imports, contributing to the wider gap.

Story continues below advertisement

There are glimmers of good news elsewhere that could improve the trade performance of Canada and the U.S. in the months ahead. While it's true global recovery has slowed markedly, the worst may be over.

The U.S. economy seems to have avoided a double-dip recession; gross domestic product grew 2 per cent in the second quarter and the housing sector is once again contributing to growth.

There's plenty of weakness in Europe, but Britain, at least, appears to have lifted itself out a double-dip in the third quarter.

Most importantly, growth in export-colossus China seems to be coming back to life. In a recent forecast, Bank of Nova Scotia said it expects growth next year to rebound to 8 per cent from 7.7 per cent this year.

Report an error Licensing Options
About the Author
National Business Correspondent

Barrie McKenna is correspondent and columnist in The Globe and Mail's Ottawa bureau. From 1997 until 2010, he covered Washington from The Globe's bureau in the U.S. capital. During his U.S. posting, he traveled widely, filing stories from more than 30 states. Mr. McKenna has also been a frequent visitor to Japan and South Korea on reporting assignments. More

Comments

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨