A USD 1.5 billion trade surplus in May, unchanged over twelve months, as upbeat exports offset recovering domestic demand. May’s goods trade surplus came in above our USD 1.2 billion estimate (Bloomberg consensus: USD 1.6 billion). Total exports rose by 6.3% YoY (5.7% in April), while imports increased by 8.1% YoY (8.3% in 1Q25). The rolling 12-month balance in May remained an elevated USD 21 billion (near 7% of GDP). The annualized quarterly trade balance also sits at USD 20 billion (SA; near the USD 25 billion cycle peak during the October 2024 quarter).
Low global oil prices are preventing a swifter trade surplus adjustment. Copper exports increased 4.4% YoY (8.8% in 1Q25), while lithium exports fell by 47% (as prices remain under strain). Following three months of annual declines, agricultural and fishing exports rose 7.4% YoY. On the manufacturing front (+6.6% YoY), food processing was a key driver (up 12%). Imports continue to reflect improving domestic demand with consumer and capital goods recovering. Capital goods increased 30.4%, sustaining a double-digit growth pace since early 4Q24. Imports of machinery for mining and construction, along with transportation equipment more than tripled over twelve months (a favorable development for investment dynamics). Consumer goods imports increased 11.9% YoY (12.5% in 1Q25), lifted by apparel, while durable goods imports also rose at a double-digit rate. Energy imports fell by 32% YoY, dragged down by oil (-53%). Sequentially, both exports and imports fell possibly reflecting the impact heightened global uncertainty amid trade war developments.
Our Take: While global activity dynamics have remained resilient so far, we expect some slowdown ahead that will likely dent exports demand and gradually diminish the elevated trade surplus. We expect a CAD of 2% of GDP this year (-1.5% last year).
