-- March trade figures highlight Canada's relative advantage as an energy supplier while the Strait of Hormuz remains closed, said BMO on Tuesday.
But while that advantage will remain until the Middle East conflict is resolved and the Strait is opened, the pace of global non-energy demand and the future of the CUSMA trade deal remain key sources of uncertainty for the Canadian economy, the bank added.
Canada's merchandise trade account swung back into a surplus of $1.8 billion in March from a revised $5.1 billion deficit in February.
BMO noted exports jumped 8.5% month over month as the outbreak of the Iran war drove up energy prices and broader geopolitical uncertainty. The export gain was led by metals (+24.0%, mostly gold shipments to the United Kingdom) and energy (+15.6%, entirely driven by higher prices). Excluding those two categories, exports were up a more 'normal' 1.1% month over month, helped by autos (+4.5%) as production continued to recover from the slowdown earlier in the year.
Meantime, imports fell 1.6% month over month after jumping in February, with the decline driven by consumer goods (-3.9%) and aircraft and other transport equipment (-12.8%).
In volume terms, exports increased 2.2% while imports fell 2.5%. Even so, BMO expects net exports dragged on growth in Q1, although the March figures limit the impact.
Meantime, the services trade account was little changed, with a $100 million deficit following a similar-sized surplus in February. Overall, Canada posted a $1.7 billion trade surplus after a $5.0 billion shortfall in the previous month.