Canada's merchandise trade deficit with the rest of the world nearly vanished in June as exports grew dramatically, Statistics Canada reported today.
The trade deficit came in at $476 million, compared to the revised $3.4-billion deficit recorded the month before. June's trade figures were markedly better than the $2.8-billion deficit that the market had been expecting..
Exports increased 6.3 per cent to $44.6 billion in June, while imports dropped 0.6 per cent to $45.1 billion. That's the best month-over-month increase in exports since December 2006.
The falling Canadian dollar, which has lost about 10 cents against the U.S. currency since the start of the year, may finally be helping to boost Canadian companies that ship to American markets, but it's clear that the stronger U.S. economy is also playing a role. Exports to the United States surged by 7.1 per cent in June.
"While a further leg down in oil prices will continue to weigh on the oil sector in Canada, the non-energy sector is likely to continue to benefit from an improving U.S. economy and low Canadian dollar," said TD economist Diana Petramala in a morning commentary, adding that this report will likely dampen speculation that the Bank of Canada might deliver another interest rate cut later this year.
David Madani, from Capital Economics, called the trade report a "positive sign" for the economy, but said "it remains to be seen whether the export sector can lift the economy out of its oil-related slump."
Export volumes rose 4.8 per cent from May. Statistics Canada reports that this was the first increase following five consecutive monthly declines. Exports were up in nine of 11 sectors.
The Bank of Canada has been hoping for months that the lower Canadian dollar and lower energy prices would give a boost to the manufacturing sector and to exports. But that benefit has been slow to materialize.
"The 'puzzling' weakness in exports that [Bank of Canada governor Stephen] Poloz noted has reversed to some extent," said BMO senior economist Benjamin Reitzes. "Expect this to be the start of meaningfully better June data, though it's a stretch to anticipate continued gains of this size for exports in the months ahead."
The Canadian dollar jumped by more than a third of a cent to 76.26 cents US shortly after the trade numbers were released. But much of that gain had melted away by the close with the dollar ending little changed from Tuesday at 75.83 US cents. The loonie hit an 11-year low on Tuesday.
U.S. trade deficit widens
The U.S. trade deficit rose slightly in June as solid consumer spending led to more imports, while the strong U.S. dollar held back exports.
The U.S. Commerce Department said Wednesday the trade gap jumped 7 per cent to $43.8 billion in June, up from $40.9 billion in May.
Imports increased 1.2 per cent to $232.4 billion, while exports edged lower to $188.6 billion.