TORONTO — Canada’s trade deficit with the rest of the world shrank in June to a surprisingly low $476 million, as exports experienced the biggest one-month surge in 8 1/2 years.
The value of Canada’s merchandise exports to other countries rose to $44.6 billion in June — up 6.3 per cent, the biggest one-month gain since December 2006 — and exports to the United States rose 7.1 per cent to $34.2 billion.
The total trade deficit — including a smaller decline in imports — was far less than the $3.4 billion gap in May, according to Statistics Canada figures released Wednesday. It is also below economist expectations of a $2.8 billion deficit, according to Thomson Reuters.
BMO Capital Markets economist Benjamin Reitzes said the solid June figures were likely making up for several months of weakness and probably won’t be repeated in July.
However, there’s reason to think the second half of this year will be better than the first half, driven by stronger U.S. economic growth and the weak Canadian dollar — which probably hasn’t had much impact yet on trade figures, Reitzes said.
“You’re starting, maybe, to see it in the June numbers.”
The Canadian dollar has recently traded near an 11-year low, hovering around the 76-cent U.S. mark. But Reitzes said it averaged above 80 cents U.S. throughout June and was above 90 cents U.S. as recently as a year ago.
“It takes a little bit longer,” Reitzes said. “It can take two to three years to see the full positive impact of the weaker currency.”
RBC senior economist Nathan Janzen said that forecasters have been counting on a boost in Canadian exports, especially to the United States, due to the competitive advantage of a weaker loonie — but it hadn’t really materialized earlier this year.
“We try not to read too much into one data point, but the June numbers would be consistent with exports starting to see some of the positive effects of a weaker Canadian dollar and an improving U.S. economy,” Janzen said.
He said the rise in June exports is also consistent with the Royal Bank’s view that Canada’s economy will start growing again in the third quarter, which began in July.
“With that said, when you look at the details of the (June) report, the rebound in exports was industries that were retracing some weakness earlier in the year,” Janzen said.
Nine of 11 sections showed increased exports, led by consumer goods as well as metal and non-metallic mineral products. Energy products increased 3.7 per cent to $7.9 billion in June, with prices up 4.5 per cent and volume down 0.7 per cent. Canadian exports excluding energy products were up 6.9 per cent in June.
Exports to countries other than the United States — by far Canada’s largest trading partner — rose 3.8 per cent to $10.4 billion.
Imports declined to $45.1 billion in June from $45.3 billion in May, with seven of 11 sections decreasing. Import volumes fell 0.9 per cent while prices were up 0.3 per cent. Imports from the United States declined 0.9 per cent to $29.5 billion.