Canada: Oil exports pullback in November - RBC CM

Nathan Janzen, Senior Economist at RBC Capital Markets, points out that the increase in the the Canadian trade deficit took place on the back of a drop in exports in November

Key Quotes: 

“Lower oil prices accounted for part but not all of the widening in the trade deficit to $2.1 billion in November from $0.9 billion in October. Most of a 9.2% drop in energy exports was accounted for by a pull-back in prices, although volumes were also down 1.1% likely in part due to the beginning of price-related cutbacks to Alberta oil production late last year.”

“Export volumes also declined ~ 1 1/2% excluding energy products, though, reflecting relatively broadly-based softness across product type.”

“The monthly international trade data is notoriously volatile. The pullback in November oil exports does, though, add to the evidence (which was already pretty strong) that lower activity in the oil & gas sector is going to weigh at least temporarily on Q4/18 GDP growth with another likely drag in Q1/19 when Alberta’s government mandated oil production cuts kick in.”

“We expect a 1.1% increase in Q4 GDP and a 1.2% increase in Q1.”

“Looking through near-term data-wiggles, though, the Canadian economy still looks to be operating close to capacity.” 

“We expect that conditions will remain strong enough for the Bank of Canada to ultimately continue hiking interest rates at a gradual pace this year — although very likely not at tomorrow’s policy rate decision.”