OTTAWA: Canadian exports surged in June, rising at the fastest pace in almost a decade amid the first signs the nation may be rebounding from its downturn.
Exports rose 6.3 per cent from the previous month, the biggest gain since December 2006, ending five straight monthly declines, Statistics Canada said in Ottawa. The June trade deficit narrowed to C$476 million ($362 million), from C$3.37 billion in May.
The rebound will be a relief for policy makers including Prime Minister Stephen Harper and Bank of Canada Governor Stephen Poloz, who have struggled to explain why the nation’s trade sector has been lagging behind even after a significant depreciation in the exchange rate. It also validates projections the economy will recover from an oil-induced slump that may have triggered a mild recession in the first half.
“Canada has likely skidded through the soft patch and is ready for a come-back over the next two quarters, with momentum in both consumer spending and exports underpinning our view of a rebound in economic growth,” Diana Petramala, an economist at Toronto-Dominion Bank, wrote in a note to investors.
The lack of export growth has puzzled policy makers expecting the two-year, 21 per cent weakening of the currency versus its U.S. counterpart to bolster sales abroad. Poloz cut interest rates last month for a second time this year to spur the economy. Still, the central bank expects a sharp pick-up in export-led growth by the end of this year, forecasting annualized growth of 2.5 per cent in the final quarter.
Harper, facing re-election in October, has also been claiming the slump will be temporary and the economy will soon recover.
The Canadian dollar rose for the first time in six days, advancing as much as 0.4 per cent to C$1.3110 versus its U.S. counterpart. It touched C$1.3213 before the trade report, the weakest since 2004. Yields on Canadian two-year bonds climbed 3 basis points to 0.43 per cent.
Canada’s trade deficit rose to a record C$3.44 billion in March and the country had been on pace for a record annual trade gap. Even with the rise in June, exports are still 1 per cent below year-ago levels.
Wednesday’s report is stronger than economists expected, with the forecast in a Bloomberg survey calling for a C$2.9 billion trade gap in June, according to the median of 16 responses.
Gains were recorded across most industries, led by a 17 per cent increase for consumer goods. Metal ore and non-metallic mineral shipments jumped 13.5 per cent, offsetting a sharp decline in that category the previous month. The car and aircraft industries were the only sectors recording declines.
Exports to the U.S. jumped 7.1 per cent.
Imports fell 0.6 per cent during the month, led by a decline in shipments by the aircraft and energy sectors.
Export volumes rose 4.8 per cent, while import volumes were down 0.9 per cent.
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