Canada’s trade deficit narrows in July, decline in imports outpaces drop in exports

Canada’s trade deficit narrowed in July from the prior month as the decline in imports outpaced those of exports. The country’s trade deficit narrowed to CAD 3 billion in the month from the prior month’s deficit of CAD 3.8 billion. Imports fell 6 percent, while exports dropped 4.9 percent. In real terms, imports dropped 2.3 percent, whereas exports fell 1.1 percent.

The fall in exports was broad based, driven by declines in aircraft and motor vehicles and parts. Metal ores and non-metallic minerals was the only commodity group to have registered a rise in the month. The decline in imports was also widespread, with aircraft, metal ores and non-metallic minerals and energy products all registering double digit declines in the month.

Canada’s trade surplus with the U.S. broadened to CAD 2.9 billion in July as imports dropped more than exports. Meanwhile, Canada’s trade deficit with the remainder of the world rose to CAD 5.9 billion as exports dropped 10 percent and imports fell 4.7 percent.

The volumes of exports dropped for two straight months that gives a weak handoff for the third quarter. In all, the third quarter growth is tracking around 2.4 percent at the moment, noted TD Economics. This is a marked slowdown from the strong 4.5 percent seen in the second quarter; however, it is still a strong rate of growth.

While the recent strength in the Canadian dollar has slightly lowered Canadian exporters’ competitiveness, demand for Canadian-made goods should gain some support from healthy U.S. economic growth, stated TD Economics. However, NAFTA negotiations pose some risk to the future trade relationship between Canada and the U.S., but it seems as though a deal is still a long way off, added TD Economics.

At 17:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was highly bullish at 112.323, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -28.3276. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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