Canadian good trade deficit widens in May

Canadian goods trade deficit broadened in May, coming in above expectations. Deficit widened to CAD 2.8 billion from a slightly revised CAD 1.90 billion in April. Exports came in flat in the month, dragged on by shipments of motor vehicles and parts and metal ores and non-metallic mineral products. Imports rose 1.7 percent, driven by aircraft and other transportation equipment and energy products.

In real terms, exports fell 1 percent, owing to the lower exports of metal ores and non-metallic minerals. In the meantime, import volumes rose 1.2 percent on the month. May’s report marked just the second time in eight months that exports did not rise. Shipments of motor vehicles and parts dropped 3.6 percent in the month. A supply disruption of auto parts from the U.S. added to a fall in exports of passenger cars and light trucks.

Exports of metal ores and non-metallic mineral products also dropped considerably, though this fall coincided with work stoppages in iron mines in April and May. Meanwhile, exports of aircraft and other transportation equipment and parts rose strongly by 7.8 percent in the month on the back of exports of transportation equipment to Saudi Arabia. Exports of forestry products and building and packaging materials also saw a marked rise.

Imports rose 1.7 percent in May, partly reversing April’s 2.8 percent fall. Imports of aircraft and other transportation equipment and parts rose 17.7 percent, the fifth straight rise for this category. Statistics Canada noted that the rise was driven by the import of many airliners from the U.S. Energy products’ imports also added to May’s gain as a number of Canadian refiners were temporarily shut down in the month, causing higher imports to meet domestic demand for refined petroleum products. Merchandise trade surplus of Canada with the U.S. narrowed in May as imports rose 1 percent and exports fell 0.2 percent.

“Despite the softer showing for export volumes and a partial rebound in real imports in May, net trade is still on track to add to growth in the second quarter – consistent with our forecast”, stated TD Economics.

At 18:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was bearish at -76.5289, while the FxWirePro's Hourly Strength Index of US Dollar was bearish at -81.7617. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex