The latest trade numbers from China, the United States and Canada show world economic growth still climbing. "It implies that the global economy is firing on all cylinders," Scotia Capital's Camilla Sutton said Friday after the numbers were released. The breakdown:
United States
The data: Exports climbed 3.2 per cent from a month earlier, and imports fell 0.5 per cent in October, narrowing the trade deficit to $38.7-billion (U.S.), the smallest since February.
The skinny: While Friday's report was positive, helped along by a weaker U.S. dollar and stronger appetite in emerging markets, some economists expect the U.S. trade picture to deteriorate again in turn, possibly ramping up trade and political tensions. Still, the key trade shortfall with China, which has fuelled a war of words between Washington and Beijing over the value of the yuan, narrowed for the second month in a row. And with a gain in exports and dip in imports, the U.S. economy is headed in the right direction.
The analyst: "The gain in real exports was a strong kickoff to the fourth quarter, and it already appears that the net trade balance will contribute materially to real GDP in that quarter … However, beyond the near term (fourth quarter and possibly the first quarter of next year), the net trade balance is likely to widen once again. Americans have a disproportionate appetite for imported goods." Christos Shiamptanis, economist, Toronto-Dominion Bank
China
The data: Exports surged 34.9 per cent in November from a year earlier while imports soared 37.7 per cent, leaving a trade surplus of $22.9-billion (U.S.).
The skinny: The surge in imports should help ease concerns that there will be a slowdown in China's increasing hunger for commodities, and is good news for global economies counting on the Asian powerhouse to help support their own exports. Coupled with other numbers and policy moves from China, as well as inflation data expected on the weekend, economists are speculating the People's Bank of China may soon raise interest rates.
The analyst: "Today's trade data underscore that, even if policy makers believe inflation will soon be under control, the economy is healthy enough to withstand further tightening … Digging into the detail, the breakdown shows that last month's acceleration in imports was almost entirely due to stronger imports intended for domestic use rather than processing and re-export. The economy appears to be picking up speed as it enters 2011." Mark Williams, senior China economist, Capital Economics
Canada
The data: Exports increased 3.1 per cent from a month earlier, and imports rose 1.2 per cent in October, narrowing the trade gap to $1.7-billion (Canadian).
The skinny: Sagging American demand and a higher loonie have sapped Canada's export strength of late, but stronger exports to countries other than the United States helped drive the improved picture in October. Exports to south of the border were up 0.4 per cent and, said Toronto-Dominion Bank economist Diana Petramala, Canadian companies shipping to the United States have lost a lot of market share likely because of the strong loonie. Canada now represents just 14 per cent of imports in the U.S., down from almost 20 per cent in 2001.
The analyst: "October's slight improvement in the trade balance must be taken in context; Canada's trade balance was in the red for the fifth-straight month in spite of the ongoing global economic recovery. Even with our upwardly revised outlook for the U.S., Canada's trade deficit is expected to persist in the coming quarters due to the lagged impact of a stronger Canadian dollar eroding the competitiveness of Canadian exporters. The trade sector's continuing drag on growth should help to keep the Bank of Canada on hold well into 2011." Emanuella Enenajor, CIBC World Markets