This is a post from Alex Carrick's blog that covers the Canadian construction industry.

Since 1985, Mr. Carrick has held the position of Canadian Chief Economist with Reed Construction Data's CanaData, the leading supplier of statistics and forecasting information for the Canadian construction industry.

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Construction Industry Forecasts

Notes from Alex Carrick - May 11, 2011

Alex Carrick
U.S. and Canadian foreign trade performed as expected in March

Foreign trade statistics for March have just been released by both the U.S. Census Bureau and Statistics Canada. The results are pretty much what were expected. The U.S. goods and services balance moved further into deficit. Canada’s merchandise trade balance, which looks at only goods exports minus good imports, became slightly more positive.

The fact the U.S. trade deficit is steadily worsening is actually a sign the economy is improving. The nation’s dependence on foreign oil, combined with an uptick in the price for crude in March, meant the dollar-value of imports (+4.9%) rose faster than exports (+4.6%).

Encouragement can be taken from the fact U.S. exports have been improving dramatically. They are at their highest level on record.

They’ve been aided by an American dollar that has dropped back significantly since reaching its peak in March 2009. At that time, when the financial crisis was its worst, investors around the world were seeking sanctuary in the greenback.

More recently, investors have been willing to undertake riskier investments. The fact the Federal Reserve is keeping its key policy-setting interest rate at little more than 0.00%, while central bankers in Europe and China have been raising theirs, has also exerted downward pressure on the value of the U.S. dollar.

U.S. export strength has centered in agricultural products and machinery and equipment. The latter has been directed at farming activity and infrastructure construction in emerging nations. The U.S. tourism and hospitality sector has also benefited from foreign visitors taking advantage of currency shifts.

Some world trends do show up in the U.S. trade statistics. For example, Germany has had even more success with export sales than the U.S. Nor have U.S. consumers been immune to the allure of some German goods, particularly in the high-end automotive market.

Among the major nations that account for the lion’s share of the U.S. trade deficit, Germany currently stands out on a year-versus-previous-year basis. Whereas in March of last year, the U.S. trade deficit with Germany accounted for 5.8% of the total shortfall, the percentage in March of this year increased to 8.3%.

No other nation has upped its share to anything like the same degree, year over year. China’s proportion of the U.S. trade deficit has dropped from 36% a year ago to just under one-third (32.9%) this year.

For a nation’s total economy, the overall trade balance is important. That’s because a strong surplus is a positive addition to gross domestic product (GDP). For the construction industry, however, the goods export performance alone is the more important indicator. 

For Canada, merchandise export numbers indicate where the action is in commodities. And it’s raw materials markets that account for so much of the mega project investments that take place in the country.

Two export categories stand out for Canada so far in 2011. Energy product exports were +17.4% in the first quarter of this year versus the same period last year. By far the major sub-category is crude petroleum and it was +27.8%. Natural gas exports have been -15.9%.

Also within “energy”, coal exports have been +34.2% year to date.

The other major category to achieve a large export gain so far in 2011 has been “industrial goods and materials”. This includes metal ores (i.e., iron, copper, nickel, zinc), +48.2%; chemicals, plastics and fertilizers, +15.2%; and precious metals and alloys (i.e., gold and silver), +89.4%.

As for the rest of the export categories – agricultural and fishing products; forestry products; machinery and equipment; and automotive products – the gains have all been between +5% and +10% year to date

Canada has been increasing its lumber exports to Asia. In the months ahead, this shift in customer base (i.e., with less reliance on the snake-bit U.S. housing market) will receive an added boost from rebuilding efforts in Japan.

The first wave is already underway and includes greater demand for Canadian plywood to be used in temporary structures such as shelters and school facilities. The second wave will be a massive effort to re-construct residential communities destroyed by the earthquake and tsunami.

On the import side for Canada, the most notable feature so far this year has been the climb in machinery and equipment purchases (+14.8%). The high-valued Canadian dollar has lowered the cost of acquiring foreign product. Many owners are seizing the opportunity to upgrade and modernize their facilities both in terms of automating output and achieving energy savings.

Alex Carrick

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News. Mr. Carrick also has a lifestyle blog that can be reached by clicking here.


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Read Other Recent Alex Carrick Posts

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04/18 - U.S. Inflation Low in March; Canada’s Central Bank Looking to Raise Rates
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