Canadian trade surplus reduces slightly in June, next exports set to be growth contributor in Q2

Canada recorded trade surplus for the second straight month in June. The surplus came in at CAD 0.13 billion, narrowing down from May’s surplus of CAD 0.56 billion, and was larger than consensus expectations of a CAD 0.3 billion deficit.

Both exports and imports dropped, with a larger drop-off reported in exports than imports. Exports dropped 5.1 percent and imports fell 4.3 percent. Excluding price impacts, markedly a considerable fall in crude oil export prices, export volumes dropped at a modest rate of 2.2 percent, whereas import volumes dropped 3.6 percent.

On the export side, most of the story was one of reversals from May’s solid gains. Aircraft and other transportation equipment shipments dropped 25 percent on softer sales of aircraft, but were still up 12 percent on the quarter as a whole, with volumes almost as strong. For the sector as whole, the price story was key: energy products shipments rose 4.7 percent in volume terms, for instance, while the nominal value of these shipments fell 7.5 percent.

The import fall was seen throughout most major categories. The volatile aircraft and other transportation equipment category was an important driver here as well, down 25.8 percent after a 19.8 percent rise in May. Energy product imports dropped for a second month, falling 14.8 percent in June.

Canadian nominal goods trade surplus with the U.S. dropped a bit, as energy shipments led to a bigger fall in exports than imports. Markedly, June was the first full month following the end of bilateral tariffs on steel and aluminium products between Canada and the U.S.

“Net exports are set to be a growth contributor for the second quarter, consistent with our tracking of 3.0 percent overall economic growth. The softer end to the quarter suggest a more modest profile is to be expected going forward”, said TD Economics in a research report.

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