OTTAWA — Canada's merchandise trade deficit with the rest of the world shrank in June to a surprisingly low $476 million, as exports surged in a broad range of sectors, including consumer goods and major resource commodities.
The trade deficit was far less than the $3.4 billion gap in May, according to Statistics Canada figures released Wednesday, and below an estimated deficit of $2.8 billion, according to Thomson Reuters.
Although the improvement was helped by a slight decline in imports, economists said the main driver for June's outperformance was strong demand for Canadian goods.
"In volumes terms, exports regained all the ground lost over the last six months," TD economist Diana Petramala wrote in a commentary.
She said Canada's trade performance is now expected to contribute positively to Canadian second-quarter economic growth, as measured by gross domestic product.
But other factors including a large drop in business investment is likely to "swamp the more positive trade story overall, leaving real GDP on track for a modest second consecutive quarterly decline," she added.
There has been an active debate in political and business circles about whether Canada fell into a recession — technically defined as two consecutive quarters of shrinking GDP — in the first half of the year. Statistics Canada reports second-quarter GDP figures on Sept. 1.
RBC senior economist Nathan Janzen wrote Wednesday that the economy as a whole probably shrank by about one per cent.
"Nonetheless, the rise in June exports and improvement in the trade balance is consistent with our view that the economy will return to a positive growth path in Q3 as strength in the U.S. economy and a weaker Canadian dollar provide support to external demand, helping to offset ongoing weakness in the oil and gas sector."
The Canadian dollar has recently traded near an 11-year low and the price of crude oil has fallen below US$50 a barrel again, about half of what it cost last summer.
Statistics Canada reported Wednesday that the value of Canada's merchandise exports in June were up 6.3 per cent from the previous month, with gains both in the United States and the rest of the world.
Overall exports rose to $44.6 billion in June, with volumes up 4.8 per cent. Prices rose 1.5 per cent.
Nine of 11 sections showed increased exports, led by consumer goods as well as metal and non-metallic mineral products. Energy products increased 3.7 per cent to $7.9 billion in June, with prices up 4.5 per cent and volume down 0.7 per cent. Canadian exports excluding energy products were up 6.9 per cent in June.
Exports to the U.S. — by far Canada's largest trading partner — rose 7.1 per cent to $34.2 billion in June, while exports to other countries increased 3.8 per cent to $10.4 billion.
Imports declined to $45.1 billion in June from $45.3 billion in May, with seven of 11 sections decreasing. Import volumes fell 0.9 per cent while prices were up 0.3 per cent. Imports from the United States declined 0.9 per cent to $29.5 billion.
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