Exports Gain for 3rd Month as Canada’s Trade Deficit Narrows

  • Shipments of non-energy goods are little changed in August
  • Trade surplus with U.S. narrows as exports fall 1.6%

Canadian exports rose for a third month in August and the country posted a smaller-than-expected trade deficit, adding to signs of a modest rebound in the sector.

Energy sales led exports 0.6 percent higher from a month earlier to C$1.94 billion ($1.47 billion), Statistics Canada reported Wednesday, and shipments abroad are up 5.3 percent since touching a two-year low in May. Falling exports to the U.S. amid a sharp decline in the value of automobile sales to that country tempered the August result.

Wednesday’s report suggests the Canadian trade sector is recovering from record shortfalls earlier this year, but continues to face tepid demand from its biggest trading partner, with the Bank of Canada highlighting export’s drag on the recovery in their rate decision last month.

The trade deficit narrowing “is a welcome development following the past deterioration,” Brittany Baumann, a strategist in Toronto at TD Securities, wrote in a note to clients. On the other hand, “further recovery in non-energy exports failed to materialize after the July comeback, while overall volumes were weak,” she wrote, adding “the report suggests the Bank of Canada will remain on the sidelines in October but maintain its dovish messaging.”

The nation’s trade deficit narrowed from a revised C$2.2 billion in July, Statistics Canada said Wednesday. That month’s shortfall was initially reported at C$2.49 billion. Economists in a Bloomberg survey forecast a deficit of C$2.45 billion.

Even with three straight months of gains, exports are down 2.5 percent from a year ago, with shipments to the U.S. falling 5.1 percent over that time. Exports to the rest of the world climbed 7.7 percent, the most since 2014.

Here are some other highlights from the report:

  • Statistics Canada revised down its July trade deficit estimate from an initially reported C$2.5 billion. Economists surveyed by Bloomberg had expected a deficit of about C$2.5 billion in August.

  • Imports were unchanged in August, keeping to a trend in recent months of little movement. Since April, imports are up just 0.5 percent compared with a gain of 4.5 percent for exports over that time.

  • Exports of energy rose 4.4 percent in August. Excluding energy, shipments abroad were unchanged.

  • Outside of energy, the largest gainers were consumer goods and metal-related products. Shipments of motor vehicles fell 5.8 percent, while exports of aircraft-related products were down 16.2 percent.

  • Exports to the U.S. were down 1.6 percent in August to C$32.4 billion, narrowing the surplus with Canada’s largest trading partner to C$2.5 billion. Exports to the U.K. were up 25 percent during the month, while sales to China were up 5.7 percent.
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