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CANADA ECONOMICS: TD on Key Implications of Trade Data

· 02/05/2021 07:41

12:26 PM EST, 02/05/2021 (MT Newswires) -- Recent economic data suggests that Canada's economy is likely to have surprised on the upside in the fourth quarter of 2020. For international trade, the near-term backdrop was strengthened by resilient international demand for goods, exports and higher commodity prices.

Still, the strength in the headline print masks underlying weaknesses and softening momentum, writes TD. The near-term outlook for the first quarter of 2021 continues to rest on shaky grounds -- services exports are deteriorating from already-weak levels. At the same time, the persistent decline in imports since November is a signal of weak domestic demand. Today's weak Labour Force Survey report corroborates this narrative, TD says.

While caution is warranted, the acceleration of vaccine deployment in several parts of the world suggests that growth should pick up in the second half of the year. For international trade, this should be underpinned by a strong rebound in services exports.