Canada trade surplus narrowed in July as imports outpaced exports

FILE PHOTO: A truck moves past stacked shipping containers at the Port of Montreal
FILE PHOTO: A truck moves past stacked shipping containers at the Port of Montreal in Montreal, Quebec, Canada, May 17, 2021. REUTERS/Christinne Muschi

September 2, 2021

By Julie Gordon

OTTAWA (Reuters) -Canada posted a narrower trade surplus in July than in the previous month, missing analyst expectations, as imports rose at a faster pace than exports, Statistics Canada data showed on Thursday.

Canada’s surplus with the world was C$778 million ($616.6 million) in July, down from a downwardly revised C$2.6 billion surplus in June, the largest in nearly 13 years.

Analysts surveyed by Reuters had on average forecast a surplus of C$1.40 billion in July.

“All things considered, I’d say it’s an upbeat month,” said Peter Hall, chief economist at Canada’s export development agency, noting that exports rose in seven of 11 categories.

Exports were up 0.6% in the month, hitting another record high at C$53.8 billion, as gains in motor vehicles and parts, along with energy and other sectors offset a sharp decrease in exports of lumber and forestry products.

“One of the real highlights of the month is that back-to-back sharp increase in the auto sector, giving us a sense that even with the chip shortage the movements of autos and parts are actually occurring,” said Hall.

Imports, meanwhile, jumped 4.2% to hit a record high of C$53.0 billion, mostly on inbound motor vehicles and parts.

Canada’s trade activity with the United States, its largest trading partner, reached record levels in July, mostly driven by growth in auto sector trade. Trade activity with the rest of the world declined.

Economists noted that while risks remain from the computer chips shortage, shipping constraints and pandemic, the July numbers suggest trade could help boost economic activity in the third quarter.

“There’s still plenty of data to go for Q3, but it looks like trade will add to GDP growth in the quarter,” said Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets.

The Canadian dollar was trading 0.1% higher at 1.2604 to the greenback, or 79.34 U.S. cents.

($1 = 1.2618 Canadian dollars)

(Reporting by Julie Gordon in Ottawa; Additional reporting by Fergal Smith in TorontoEditing by Steve Orlofsky and Lisa Shumaker)