OTTAWA: Canada’s trade deficit narrowed markedly in June as exports to the U.S. rose at the fastest pace in six years, offering a positive reading on a Canadian economy that has struggled so far this year.
Canada posted a trade deficit of 476 million Canadian dollars ($361 million), Statistics Canada said Wednesday—the country’s smallest trade deficit in seven months. Expectations were for a much bigger C$2.90 billion trade deficit, according to economists at Royal Bank of Canada.
Notably, non-energy exports advanced 6.9%, breaking a two-month-losing streak for the category.
The June trade report will likely offer comfort to Canadian policy makers who have been looking for a pickup in Canada’s non-energy exports amid the steep drop in prices for crude oil, Canada’s largest export. Last month, Bank of Canada Governor Stephen Poloz said he found it “puzzling” that Canadian exporters had yet to capitalize on an improving U.S. economy and a weaker Canadian currency, which makes Canadian goods cheaper abroad. The central bank cut its main interest rate last month, by 25 basis points to 0.50%, to counter ongoing economic weakness resulting from lower oil prices.
The Canadian dollar strengthened after the trade report, climbing to 76.2 cents U.S. recently from 75.9 U.S. cents just before the data were released.
Meanwhile, U.S. trade data also out Wednesday showed a wider trade balance for Canada’s biggest trading partner, as a stronger greenback made U.S. exports more expensive abroad.
Canadian exports rose 6.3% to C$44.61 billion overall in June, recording their biggest gain since December 2006, reflecting higher prices but especially bigger volumes. On a volume basis, Canadian exports had their best month since July 2011, Mr. Chandler said. Imports declined 0.6% to C$45.09 billion.
Canadian energy exports advanced 3.7%. Exports to the U.S., which takes up some three-quarters of Canadian exports, jumped 7.1% to C$34.20 billion.
The Bank of Canada had expected non-energy exports to fuel a recovery beginning in the second quarter and pick up steam by midyear, but the pickup has been slow to materialize, Canada’s economy shrank in the first quarter and appears headed for two straight quarters of negative growth. Data last week indicated the Canadian economy declined for a fifth-straight month in May, with manufacturing output down 1.7% in the month. Wednesday’s trade report was the first major Canadian indicator for June.
The gains in exports were widespread, with nine of 11 sectors tracked reporting gains. Exports of consumer goods rose 17.2% to C$5.99 billion—which the data agency said was a record level—-led by pharmaceutical and medicinal products. Exports of metal and nonmetallic mineral products advanced 10.8% to C$5.07 billion.
