Canada Merchandise Trade Deficit Shrinks To $476M In June, Less Than Expected

Resilience in job growth should help maintain steady demand from U.S. consumers, lifting imports. Statistics Canada reports that this was the first increase following five consecutive monthly declines.

June’s private payroll gains were revised down to 229 000 from the previously reported 237 000.

The report is jointly developed with Moody’s Analytics. Last month, Bank of Canada Governor Stephen Poloz said he found it “puzzling” that Canadian exporters had yet to capitalize on an improving U.S. economy and a weaker Canadian currency, which makes Canadian goods cheaper overseas.

US stock index futures marginally pared gains after the data, while prices for U.S. Treasuries fell. The greenback appreciated about 22 percent from June 2014 through August 3 against a basket of major currencies.

The U.S. trade deficit rose 7.1% to a seasonally adjusted $43.8 billion in June, largely reflecting higher imports such as autos and drugs from the European Union. June’s trade figures were markedly better than the $2.9 billion deficit that the market had been expecting. Analysts had been expecting a deficit of $42.8bn.

But following stronger-than-forecast construction and factory inventory data, economists expected GDP would be revised to as high as a 3% annual rate when the government publishes its second GDP estimate later this month.

Domestic demand grew solidly in the second quarter. Imports from the United States declined 0.9 per cent to $29.5 billion.

Export volumes rose 4.8 per cent from May. Despite firming domestic demand, some of the imports likely ended up in inventories, which remained at very high levels in the second quarter.

The US trade deficit widened more than expected in June as an acceleration in domestic demand in the second quarter and a strong dollar sucked in imports of food and automobiles.

Exports to the United States, which accounted for 76.7 percent of Canada’s global total in June, jumped by 7.1 percent, while imports dropped 0.9 percent. That lowered exports and pushed the deficit to a three-year high in March of $50.6 billion.

Trade has been volatile this year, mostly because of labor disputes at West Coast ports in the first quarter that delayed shipping of U.S. goods overseas. The change in the goods trade balance usually determines if the overall deficit goes up or down.