Canada’s Trade Surplus Widens for Fourth Consecutive Month in June

Aug 04 26, 13:28 GMT

Canada’s trade balance moved further into surplus territory in June, widening to $3.9 billion from $3.7 billion the prior month. A notably weaker Canadian dollar in June provided a modest boost to trade values, lifting export receipts, while increasing the Canadian-dollar cost of imports.
Exports in June rose by 0.4% month-on-month (m/m) continuing a string of sturdy gains over the past few months. A sizeable 27.9% m/m gain in unwrought gold exports offset a 10% m/m decline in energy exports, mainly driven by lower oil prices. Exports of metal ores and non-metallic minerals advanced again (+15.1% m/m), while exports of motor vehicles and parts notched a decent 2.4% m/m gain.
Goods imports edged up by 0.2% m/m in June, reversing April’s drag. The gain was narrowly-based with imports of computers and computer peripherals (+59% m/m) contributing to most of the gain. Otherwise, 9 of 11 subsectors saw a decrease in imports, including industrial machinery and parts (-3.3% m/m), consumer goods (-3.3% m/m), and metal ores and non-metallic minerals (-1.3% m/m).
In volume terms, exports rose by 1.1% m/m while imports slid by 1.5% m/m.
Canada’s merchandise trade surplus with the United States narrowed to $10 billion in June from $11.1 billion in April. Exports to non-U.S. destinations rose 0.7% on the month.

Key Implications

With the full quarter trade picture now in hand, net exports look to have shifted from a material Q1 drag to a solid tailwind for Q2 real GDP tracking. That should reinforce the narrative that real GDP is expected to rebound handsomely following flat growth last quarter. However, signals in trade remain noisy given the still-outsized swings in energy, autos, gold and computer equipment-related flows.
Looking ahead, the risks to the trade backdrop remain slightly tilted to the downside. CUSMA remains in force despite a failure to renew the agreement by the July 1st deadline, but annual reviews will prolong uncertainty. More recently, if the new 50% Section 338 tariffs take effect on August 19, they would add a targeted but sapping shock on top of existing tariffs, even as solid U.S. demand and commodity flows provide some offset.