Canada's exports drop as supply chain woes drag auto sector

·2-min read
FILE PHOTO: A truck moves past stacked shipping containers at the Port of Montreal

By Julie Gordon

OTTAWA (Reuters) -Canada's exports fell in September as a semi-conductor chip shortage weighed on motor vehicle and parts production, though that decline was partially offset by record high crude oil exports, Statistics Canada data showed on Thursday.

Imports were down 3.0%, also hit hard by the worsening supply chain issues for motor vehicle and parts. Canada's trade surplus with the world, meanwhile, rose to C$1.86 billion ($1.50 billion), beating expectations of C$1.55 billion.

"The real message here is not demand, demand is very strong. The real issue here is supply chains, and now they're starting to bite on overall trade activity really hard," said Peter Hall, chief economist at Export Development Canada.

Hall added that those issues were likely to continue weighing on Canada's manufacturers, particularly the auto sector, for months to come.

"This is just creating chaos," he said. "The best indication that we got (of when) things would actually start to settle down is mid of next year. That's a long way away."

Exports of motor vehicles and parts fell 17.9% in September from August, while exports of energy products rose 6.1%, buoyed by high crude prices. Imports of motor vehicles and parts were down 13.6% on the month.

While the decline in imports is technically positive for economic growth, economists noted that the two-way trade slump shows the direness of the supply chain bottlenecks.

"The slump in trade in both directions is a concern as it demonstrates just how big an impact that supply constraints are having, particularly on the motor vehicle sector," said Paul Ashworth, chief North America economist for Capital Economics.

Capital Economics expects third-quarter annualized GDP growth of little more than 2%, well below the Bank of Canada's 5.5% projection.

The Canadian dollar was trading 0.3% lower at 1.2425 to the greenback, or 80.48 U.S. cents as the U.S. dollar rallied against a basket of major currencies.

(Reporting by Julie Gordon in Ottawa; Editing by Kirsten Donovan and Andrea Ricci)

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