Canada’s international trade deficit likely widened in May on huge drop in energy exports

The Canadian international trade deficit is likely to have widened in May, owing to a huge decline in energy exports and a rise in import activity. According to a TD Economics research report, the international trade deficit is likely to have broadened to CAD 0.80 billion in May. Non-energy exports are expected to have declined moderately and add to the drag from energy, where a sharp drop in prices would overshadow a flat or modest rise in volumes.

There are downside risks to motor vehicle exports after a sharp drop in manufacturing shipments and a worsening outlook for U.S. auto sales new countervailing duties on softwood lumber should be a drag on forestry products’ exports. Factory prices are also expected to have been a drag on nominal exports, having dropped 0.2 percent on the month. Meanwhile, import activity is seen edging higher on strong domestic demand.

Therefore, the goods-export revival is not quite happening and Canada’s competitive positive position continues to be under challenge, mainly because of high unit labor costs relative to the U.S. and Mexico. Moreover, the second quarter might mark the top to Canada’s economic rebound, stated TD Economics.

At 22:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -102.758, while the FxWirePro's Hourly Strength Index of Canadian Dollar was bullish at 74.2505. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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