Canada received a "huge gift" from the recent lift in commodity prices, which helped swing the most recent trade data from a $5.1 billion deficit in February to a $1.8 billion surplus in March, said veteran market watcher David Rosenberg after Tuesday's data.
"We haven't seen black ink like that since January 2025," according to Rosenberg. "The consensus was looking for an improvement, but nothing like this -- markets were bracing for a halving in the deficit to $2.5 billion," he said.
Exports soared 8.5% month over month after a "hefty" 6.8% rebound in February and are back to challenging record highs, Rosenberg noted. However, "eyebrows may be raised" over the fact that imports fell 1.6% month over month (-2.5% in real terms), which may call into question any veracity on the domestic demand front, he said.
The headline is an "obvious positive" for the Canadian dollar (CAD or loonie), given the positive balance-of-payments implications, which are measured in nominal terms, said Rosenberg. But as for gross domestic product, the effect is less dramatic as in real terms, exports picked up at a more mild 2.2% pace during the month, he added.
Canada is benefiting from the Iran war and the subsequent surge in energy prices, said Rosenberg, noting that energy sector exports jumped 15.6% sequentially, which has occurred just four other times since 2010. Metals and minerals brought in a 24% month-over-month stream of export income on top of a 12% surge in February -- only twice in the historical record has Rosenberg seen back-to-back numbers like these.
"But what is interesting is the extent to which this was all in prices as opposed to volumes. Not to rain on anyone's parade, but as a measure of the lack of domestic competitiveness, Canadian exports of manufactured products like industrial machinery dropped -3.7% in March, the steepest decline since last August (and the level is practically flat now compared to then)," he added.