OTTAWA – Growth in Canadian exports helped shrink the country’s trade deficit in July, boosting the case that the economy is on track for growth in the second half of the year.
Statistics Canada said Thursday that the trade deficit narrowed to $593 million in July from June’s revised deficit of $811 million. The June deficit had initially been reported at $476 million.
Economists had expected a deficit of $1.3 billion for July, according to Thomson Reuters.
“There’s no two ways about it, this is a solid report,” Bank of Montreal senior economist Benjamin Reitzes wrote in a report.
“It looks like better U.S. growth and the weaker Canadian dollar might finally be providing a boost to trade.”
The trade data follows a report earlier this week that the country slipped into a recession in the first half of the year as the economy contracted in the second quarter.
However, Statistics Canada noted the economy grew in June, raising hopes that the dip was short-lived and that the second half of the year would show growth.
The Bank of Canada, which is expected to make its next interest rate announcement next week, has predicted the economy will grow at an annual pace of 1.5 per cent in the third quarter before picking up to a 2.5 per cent pace in the last three months of the year.
CIBC economist Nick Exarhos said the July trade data suggests third-quarter economic growth could come in above the central bank’s forecast.
“After a strong end to the second quarter with June’s 0.5 per cent gain in monthly GDP, the gain in non-energy exports and the advance in real volumes points to July following up with a healthy reading of its own,” he said.
“That should be enough to keep governor (Stephen) Poloz on the sidelines, with the fourth quarter being the key in charting the course of the economy — and monetary policy — heading into 2016.”
The Bank of Canada has cut its key interest rate twice this year in an effort to boost the economy, which has struggled with the sharp drop in oil prices.
Canadian exports in July rose 2.3 per cent to nearly $45.5 billion and were concentrated in non-energy products. Excluding energy products, exports rose 4.0 per cent.
Exports of motor vehicles and parts improved by 9.9 per cent to $7.6 billion in July, boosted by passenger cars and light trucks as scheduled shutdowns at several automotive plants were shorter than usual.
Consumer goods exports gained 7.3 per cent to $6.4 billion, while aircraft and other transportation equipment and parts rose 19.2 per cent to $2.4 billion.
Energy exports slipped 5.7 per cent to $7.3 billion.
Meanwhile, Canada’s imports were up 1.7 per cent at nearly $46.1 billion.
The increase came as energy imports advanced 12.8 per cent to $3.0 billion, while imports of aircraft and other transportation equipment and parts gained 22.9 per cent to $1.7 billion.
Imports of electronic and electrical equipment and parts increased 4.4 per cent to $5.5 billion.