- Exports of goods rose 11.1% in July, imports up 12.7%
- Gains led by motor vehicle sector
- Trade flows still down from February but improving, along with industrial sector
Both the increase in exports and imports in July were boosted by recovering activity in the motor vehicle sector where production levels bounced back to significantly above year-ago levels in July after falling essentially to zero in April. Part of that bounce-back is tied to the unusual pattern for production this year – auto plants normally shut down for a period of July but generally did not this year given the COVID-19 production disruptions in the spring. Exports of motor vehicle and parts were up 37% in June and imports rose 50%, with both building on 200%+ increases the prior month.
There were also positive signs that the recovery in the industrial sector is gaining some added traction. Exports of industrial machinery and equipment were were up 11% in July (although still 14.5% below February levels.) Imports of equipment surged, in part reportedly boosted by purchases of cellphones from Asia but also reflecting a second-straight 9% increase in industrial equipment imports. The latter is also still below (-6.2%) February levels, but increases over the last couple of months are a positive sign that at least some business investment spending is returning. Early indicators of business confidence in August, including a tick up in the August Markit manufacturing PMI in the month, suggest that recent momentum is holding up in the near-term.
Services trade numbers were also released this morning, and those trade flows remained very weak – services exports were still down 24% from a year ago in July, imports -34%. But that is also not surprising with restrictions on border crossings still keeping trade in travel services extremely subdued. That ongoing weakness in the services side of the economy is one of the key reasons that we continue to expect economic activity in Canada to be running well-below long-run capacity limits at the end of this year. But the trade numbers for July are still consistent with an initial bounce-back that has also been somewhat sharper than expected.
