Canadian exports likely to contribute positively to GDP growth in Q3

Canadian trade deficit narrowed in July on improvement in exports and decline in imports. Deficit came in at CAD 2.5 billion from June’s deficit of CAD 4 billion. Exports grew 3.4 percent, whereas imports declined a bit by 0.1 percent. In volume terms, moves were more pronounced, as exports were up 3.7 percent, while imports dropped 1.2 percent.

Gains in export were led by non-energy products that rose 4.1 percent in July. Exports of motor vehicle and parts were firm, rising 6.2 percent, following five straight months of decline, because of shorter seasonal shutdowns at certain plants. Metal and non-metallic mineral products also grew strongly by 9.7 percent, while aircraft and other transportation equipment rose 9.6 percent and industrial machinery and equipment were up 6 percent.

Meanwhile, lower oil prices impacted energy exports in July that fell 9.6 percent. Volumes of exports still increased 3.2 percent in sequential terms, thanks to stronger natural gas and refined product exports. But crude oil and bitumen export volumes declined for the fourth straight month.

Imports in Canada declined despite rises in six out of 11 sectors. Consumer goods imports dropped 2 percent, while imports of motor vehicles and parts fell 1.7 percent. Imports of electrical equipment and electronic parts declined 2.6 percent.

The rise in the volumes of export is July is encouraging; however, it does not undo the damage from the five consecutive month of disappointments in exports, said TD Economics in a research report. Volumes of exports continue to stay 3 percent below year ago levels. Trade data of July adds to the development snapshot of Canada’s economy in the third quarter where exports are likely to provide decent positive contribution to the economic growth.

“We expect further strides to be taken in the months ahead alongside continued growth south of the border, which should translate into increased demand for Canadian goods”, added TD Economics.