Canada: Exports bounced back in July – RBC Economics

Nathan Janzen, Senior Economist at RBC Economics, notes that the Canadian trade deficit in July narrowed to –$2.5 billion from a record $4.0 billion shortfall (revised from -$3.6 billion) in June while the exports jumped 3.4% and imports dipped 0.1% in July.

Key Quotes 

“The export gain was led by broadly-based strength outside of the energy sector with 9 of 11 sections reporting increases. Even in the energy sector, a 0.8% dip in the month was due to lower prices with volume shipments up 3.2%. Overall, volume exports were up 3.4% with non-energy shipments rising at a similar pace. The dip in imports in July, although positive in an accounting sense for the net trade balance, was somewhat more disappointing, particularly a pull-back in industrial equipment imports that, if sustained, would bode poorly for business investment in the quarter.

The rise in export volumes left the measure already up 7.3% in July relative to its Q2 average, consistent with our forecast for a bounce-back following an outsized export drop of 18.5% in Q2. With import volumes down in the month, net trade appears likely to make a strong contribution to Q3 GDP growth, potentially retracing half or more of the Q2 weakness when net trade subtracted almost 6 percentage points from growth.”