Canada’s trade reports suffer from a lack of timely oil industry figures, leading to multimillion dollar revisions on data that’s crucial to the Bank of Canada’s economic outlook.
Partial crude price and volume figures and changing industry practices make it impossible to get accurate energy-shipment data in time for the monthly reports. After revised numbers come in, deficits can shrink by hundreds of millions of dollars and surpluses have turned into shortfalls.
“They make me feel queasy sometimes,” Tony Peluso, a senior economist at Statistics Canada, said of the revisions. “It’s a matter of ongoing concern here at StatsCan, so we do take it very seriously.”
The data swings come at a crucial time for policy makers such as Bank of Canada Governor Stephen Poloz, who has said his outlook for the economy “hinges critically” on exports and business investment.
In Statistics Canada’s Jan. 7 report, for example, revised price information cut C$400 million ($369 million) from exports, helping turn October’s initially reported C$75 million surplus into a C$908 million shortfall. In March 2013, updated data on energy shipments led the agency to cut the December 2012 trade deficit to C$332 million from C$901 million.
Over the past 12 months, the energy component of exports was revised by an average of about C$440 million in the following report, according to Bloomberg calculations using Statistics Canada data. That’s equal to more than 4 percent of total energy exports. Subsequent months bring more revisions.
Trying to discern the trade balance trend through the noise of monthly reports is “very difficult,” Poloz said in an Aug. 22 interview in Jackson Hole, Wyoming.
The effort to improve the trade data comes as Statistics Canada faces criticism after it retracted its July employment report this month because of a data processing error. Poloz said that incident hasn’t shaken his faith in the Ottawa-based department.
“I think they’re the best agency in the world,” Poloz said in the interview. “It’s a very hard job.”
Canada publishes trade figures about five weeks after the end of the month in question to match the release of U.S. figures. That timetable makes it hard to incorporate data from sources including customs records, the National Energy Board and Statistics Canada’s survey of pipeline companies, Peluso said.
“As a result, we have to make estimates of both crude prices and quantities for the reference month,” Peluso said in a separate e-mailed response to questions.
Those estimates can lead to large revisions in subsequent reports.
“It’s nuts,” said Arlene Kish, senior economist at Lexington, Massachusetts-based consulting firm IHS Global Insight. “The monthly merchandise trade data, it’s not my favorite,” she said, adding that she relies more on quarterly output figures to gauge the strength of the economy.
Today, the agency said gross domestic product grew at a 3.1 percent annualized pace in the second quarter, including a 17.8 percent jump in exports.
Trade is vital to Canada’s economy, with exports making up about one-third of gross domestic product. Among shipments abroad, the largest component is energy products, including bitumen from Alberta’s oil sands, the world’s third-largest oil reserve. Energy exports climbed to C$11.9 billion in June from C$6.1 billion a decade ago, almost double the next largest grouping, which is motor vehicles and parts at C$6.2 billion.
Peluso, who works on the monthly report, said it took him about a year to learn how the energy figures are compiled and produced, adding that constant changes in the oil industry complicate matters. He cited multiple contract lengths and crude types, the role of wholesalers, seasonal factors and the increasing shipments of crude by rail.
Peluso said he and a colleague traveled to Calgary this year, spending three days with industry representatives to find new ways of uncovering flows of crude oil and natural gas, which could lessen the magnitude of the revisions.
“We are hoping to bring it down within a couple months,” he said.
Statistics Canada’s media office had no immediate comment on the difficulties of gathering timely energy-shipment data. The Calgary-based Canadian Association of Petroleum Producers declined to comment.
“I have some sympathy for what they are saying,” Todd Hirsch, chief economist at ATB Financial, a provincially-owned bank, said by phone from Calgary. The price paid for Alberta’s heavier oil, Western Canadian Select, can be harder to track than West Texas Intermediate, because “it’s priced generally through contracts that are based on WTI, but most of those contracts are negotiated between buyers and sellers and not on a spot market,” Hirsch said.
The next monthly trade report is scheduled for Sept. 4. Economists surveyed by Bloomberg through 11:00 a.m. Ottawa time today were forecasting a C$1.1 billion surplus for July. At least until the figure gets revised in October.