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By HaleStewart January 8, 2015 8:16 am
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Oil Price Drop Starting To Impact Canada

     Several economic statistics released over the last few days have indicated the energy slowdown is negatively impacting Canada.  Let's start with exports, which decreased 3.5%.  However, the real story was the drop in energy related goods:

Exports of energy products fell 7.8% to $9.5 billion in November, the sixth consecutive monthly decrease. Crude oil and crude bitumen was the main contributor to the decline, down 9.9% to $6.9 billion, as prices fell 6.7% and volumes were down 3.4%. Exports of other energy products (-28.4%), mainly coal, also decreased.

The accompanying table provides the granular detail:

Not only did exports of energy products drop 7.8%, but so did the exports of other raw materials such as metal ores and mineral products.

     The sum effect is a very large, one-month hit to exports, as shown by the deep blue line in the graph below:

     And a drop in energy prices -- specifically gasoline (see chart below)-- led to a slower pace of increase in inflation, which increased 2% Y/Y:

     These two indicators are some of the first to show the impact of lower energy prices on the Canadian economy.  Considering the sharp drop in exports and the continued drop in gas prices, this won't be the first time we hear of this effect.

Hale Stewart is a former bond broker who has been writing about economics and financial markets since 2006 on the Bonddad Blog.  He is also a tax attorney with a domestic and international practice while also forming and managing captive insurance companies for US companies.   You can follow him on twitter at:@captivelawyer 

 

 

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