July 3 (Bloomberg) -- Canada’s merchandise trade deficit narrowed in May as gains in automobile and energy shipments brought exports toward the record set before the last recession.
The C$152 million ($143 million) deficit reported by Statistics Canada today was smaller than the C$300 million median projection in a Bloomberg survey of 17 economists.
Canada has recorded just three trade surpluses since the start of 2012, underscoring Bank of Canada Governor Stephen Poloz’s disappointment with the exports he says are needed to complete an economic recovery. Output expanded by 0.1 percent in April, Ottawa-based Statistics Canada said this week, a result that fell short of economist forecasts.
“Poloz has mentioned an export wedge he would like to see filled,” Nick Exarhos, an economist at CIBC World Markets in Toronto, said in a telephone interview. Trade deficits and strength in Canada’s dollar will make Poloz “loathe to talk up rate hikes and drop his neutral stance” for the 1 percent policy interest rate at the July 16 announcement, he said.
Canada’s dollar weakened 0.1 percent to C$1.0677 per U.S. dollar at 9:23 a.m. Toronto time. The currency has strengthened by 2.2 percent over the past month.
The 3.5 percent rise in exports for May to C$44.2 billion followed a 2.8 percent decline in April. The total remains short of the record of C$44.5 billion set in July 2008 before the last recession. Imports rose 1.6 percent in May to a record C$44.3 billion, the fourth straight gain.
The volume of exports advanced 4.2 percent and import volumes rose 2.4 percent, Statistics Canada said. Volume figures adjust for price changes and can be a better indicator of how trade contributes to economic growth.
Automobile and parts exports rose a fourth month in May, by 9.8 percent to C$6.62 billion, as some factories resumed production after maintenance shutdowns, Statistics Canada said. That brought the increase over the 12 months through May to 20.3 percent.
Energy exports gained 3.4 percent in May to C$10.9 billion, with a 12-month increase of 21.9 percent.
Reports from the U.S. today suggested stronger global demand that may benefit Canadian exporters in coming months. American unemployment fell to a six-year low of 6.1 percent in June and the trade deficit in the world’s largest economy narrowed more than forecast in May on record exports.
Shipments abroad make up about one-third of Canada’s economy, with about 75 percent going to the U.S. The surplus with the U.S. widened to C$4.76 billion in May from C$4.01 billion a month earlier.
Statistics Canada today also boosted April’s estimated trade deficit to C$961 million from an initial C$638 million.
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