Canada's trade deficit widens in July; exports and imports jump

OTTAWA: Canada's trade deficit grew to C$2.45 billion ($1.87 billion) in July as both imports and exports continued to recover from the lifting of restrictions put in place to tackle the coronavirus, Statistics Canada said on Thursday.

Analysts polled by Reuters had predicted July's deficit would be C$2.50 billion. Statscan slashed June's shortfall to C$1.59 billion from an initial C$3.19 billion, citing updated calculations on the value of crude oil shipments.

Imports jumped 12.7% in July from June while exports posted an 11.1% gain, both pushed higher by the motor vehicles and parts sector.

"That's beyond expectations and it's tremendously good news for the exporting community and for the economy as a whole," said Peter Hall, chief economist at Export Development Canada.

"We are back from the chasm," he said by phone.

That said, overall exports are 6.0% below where they were in February before large sections of the economy were shut down to fight the coronavirus epidemic, while imports are 4.1% lower.

Statscan said most auto assembly plants had adjusted by increasing production in July and having shorter seasonal shutdowns. This led to an atypical increase in supply and demand for motor vehicles and parts domestically and abroad, it added.

"This report provides more evidence that Canada's economy is recovering from the pandemic more quickly than we had originally expected," said Paul Ashworth, chief North America economist at Capital Economics.

The news of the larger deficit, coupled with lower oil prices, helped push the Canadian dollar down against its broadly stronger US counterpart. The loonie was trading 0.5% lower at 1.3107 to the greenback, or 76.30 US cents, which was its biggest decline in nearly one month.

Canada sent 73.8% of all its goods exports to the United States in July. Exports to the United States rose by 15.1% to C$33.52 billion while imports grew by 16.2%, hitting C$30.66 billion.