Canada posted the widest merchandise trade surplus in almost six years in July as demand for the nation’s automobiles led exports to a record.
The surplus grew to C$2.58 billion ($2.37 billion), the largest since October 2008, from C$1.83 billion in June, Statistics Canada said today in Ottawa. Motor vehicle and parts shipments jumped 9.7 percent to C$6.9 billion.
Canada needs sustained export gains to encourage businesses to boost investment if the world’s 11th largest economy is to reach full output over the next two years, the country’s central bank said yesterday.
Today’s report “should lend some credibility to the staying power of the recent export outperformance -- which will be needed in convincing the Bank of Canada that at least part of their rotation away from the consumer is underway,” Nick Exarhos, an economist at CIBC World Markets in Toronto, wrote in a research note.
The Bank of Canada kept its key interest rate at 1 percent yesterday saying that increased U.S. demand and a weaker currency aided exports in the second quarter.
Canada’s dollar strengthened 0.5 percent to C$1.0838 per U.S. dollar at 10:22 a.m. in Toronto.
Exports rose 1.4 percent to C$45.5 billion in July, with motor vehicles the biggest contributor, Statistics Canada said.
Canadian assembly lines for companies such as Ford Motor Co. and Toyota Motor Corp. are humming on renewed North American demand, today’s report said. “Motor vehicles and parts increased for the fifth time in seven months, as automobile sales in both Canada and the United States have hit record highs throughout the year,” the agency said.
Exports were also supported by shipments of forestry products, which climbed 3.6 percent to C$3.11 billion. Crude oil and bitumen exports fell 1.6 percent to C$8.5 billion from June’s record of C$8.6 billion.
Calgary-based oil and natural gas producer Vermilion Energy Inc. said rising U.S.-dollar energy prices and the weaker Canadian dollar is boosting revenue when it brings the proceeds home to pay local costs.
“This is a pretty good macro environment for the company,” Anthony Marino, president and chief operating officer, said on Aug. 27 in an interview at his office. “You can have relatively strong commodity prices and a weakening Canadian dollar environment.”
The export increase in July follows the 17.8 percent second-quarter annualized gain that led output growth of 3.1 percent.
Imports fell 0.3 percent to C$43.0 billion, the second monthly decline, Statistics Canada said today.
The July trade surplus exceeded all 18 forecasts in a Bloomberg economist survey with a median of C$1.15 billion.
The volume of exports advanced 1.1 percent and import volumes rose 0.4 percent, Statistics Canada said. Volume figures adjust for price changes and can be a better indicator of how trade contributes to economic growth.
“At the mid-point of 2014 we are seeing ongoing growth as Canadian trade continues to increase with both strong demand for Canadian exports and for imports to Canada,” Robin Silvester, Chief Executive Officer of the port of Vancouver, Canada’s largest, said in an Aug. 27 report.
Exports make up about one-third of Canada’s economy, with about 75 percent of the shipments going to the U.S.
Yesterday the Bank of Canada dropped language about “serial disappointment” with global growth, saying that “a solid recovery seems to be back on track” in the U.S. while “the recovery in Europe appears to be faltering as the situation in Ukraine weighs on confidence.”
The surplus with the U.S. widened to C$5.1 billion in July from C$4.9 billion a month earlier. The deficit with countries other than the U.S. narrowed to C$2.6 billion from C$3.0 billion.
Statistics Canada also released a draft paper explaining efforts to reduce its revisions to estimated energy shipments. The agency is exploring new sources of data on crude oil and natural gas and improved calculation methods to curb “a pattern of somewhat larger revisions to energy products.”
Some data doesn’t arrive in time to be included in monthly trade reports, according to the paper.
To contact the reporter on this story: Greg Quinn in Ottawa at firstname.lastname@example.org
To contact the editors responsible for this story: Paul Badertscher at email@example.com