OTTAWA — Canada’s international trade deficit increased by a record level in July as imports rose two per cent and exports declined 0.7%, Statistics Canada said Thursday.

The deficit widened to $2.7-billion during the month, up from a revised $1.8-billion in June. That was the biggest trade gap since the federal agency began tracking numbers in 1971.

Economists had forecast a trade deficit of around $800-million for July.

Exports fell to $32.8-billion in July from $33-billion the previous month, marking the fourth decline in six months. In volume terms, exports were down 0.6 per cent, with declines in all sectors except industrial goods and materials.

“Machinery and equipment, other consumer goods and forestry products led the decrease in the value of exports,” the agency said. “A gain in exports of industrial goods and materials moderated the decline.”

Imports advanced to $35.5-billion in July from $34.9-billion a month earlier. The increase was the fourth in six months and the biggest gain since November 2008. Import volumes rose 1.4%.

“Energy products accounted for over half the growth in overall imports, followed by automotive products and machinery and equipment. In contrast, imports of industrial goods and materials fell in July,” Statistics Canada said.

Exports to the United States dropped 2.2% in July, while imports advanced 2.9%. That narrowed Canada's trade surplus with the U.S. to $1.2-billion from $2.4-billion in June.

Exports to countries other than the United States rose 3.7%, with imports increasing 0.2%.

Eric Lascelles at TD Securities said “in the pursuit of silver linings, it can be said that exports only fell slightly, whereas it was the aggressive two per cent rise in imports that did the trade balance in.”

“In turn, rising imports have a mixed interpretation,” he said. “They are unambiguously a mathematical negative for GDP, but can also hint at robust domestic demand and often bleed their way into better business investment.”

He added: “In short, while no one should be especially pleased at Canada’s new record trade deficit, much of the deficit is outside of Canada’s direct control, and relates in large part to a slow U.S. recovery.”

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