OTTAWA — Canada’s merchandise trade deficit climbed to half a billion dollars in May as an increase in the value of imports outpaced gains on the export side, Statistics Canada reported Tuesday.
The agency said the shortfall widened to $503 million in May from $330 million in April as the country suffered a trade deficit for the third consecutive month.
Exports rose to $34.5 billion from $32.8 billion in April after two months of decline. However, imports also rose — to $35 billion from $33.1 billion in April — as all import sectors except agricultural and fishing products grew in May.
Merchandise exports rose 5.2 per cent in May, led by higher volumes of automotive products, while imports increased 5.7 per cent. While all export sectors posted gains, automotive products accounted for over half the growth, Statistics Canada said.
Canada’s trade deficit with countries other than the United States expanded to $4.1 billion in May from $3.8 billion in April.
Exports to countries other than the United States grew 4.4 per cent, led by a 25.2 per cent increase in exports to the European Union. Imports rose 5.5 per cent.
Overall, export volumes increased 3.9 per cent while prices of exported merchandise rose 1.2 per cent. Import volumes increased 4.2 per cent while prices grew 1.4.
Machinery and equipment, industrial goods and materials as well as other consumer goods led the gain in imports.
“A deterioration in a trade balance does represent a drag on overall GDP growth though, in this particular case, it reflects an encouraging jump in exports being offset by an even greater surge in imports with domestic demand remaining robust,” said RBC assistant chief economist Paul Ferley.
TD Bank economist Millan Mulraine also described the trade report as “somewhat mixed.”
“The favourable impression given by the improving trade flows picture for Canada is somewhat offset by the fact that the trade balance remained drenched in red,” Mulraine wrote in a note.
“Nevertheless, with much of the gains in imports in May being accounted for by machinery and equipment purchases, it is possible that trade could indirectly add favourably to GDP (via increased investment spending) at least for this month,” he said.