Canada trade data show economic strength ahead of rate decision

July 6, 2017

Canadian exports and imports both hit record highs in May, Statistics Canada said on Thursday, reflecting continued economic strength ahead of a highly anticipated interest rate decision next week.

Although the trade deficit almost doubled to $1.09-billion, that was partly due to one-time imports of five new airliners. Analysts in a Reuters poll had forecast a shortfall of $530-million.

The Bank of Canada is set to make an interest rate announcement on July 12. Markets increasingly expect a hike to come soon as the economy recovers from a prolonged shock caused by low oil prices.

The central bank, which cut rates twice in 2015 to help contain the damage, has consistently fretted about what it says are disappointing non-energy exports.

Paul Ferley, assistant chief economist at Royal Bank of Canada, said the strength in imports implied a strong domestic economy, and the gain in exports suggested robust demand for Canadian products...

Canadian companies are more optimistic about future sales and exports, while improving demand should boost investment and hiring, the Bank of Canada said last week, increasing expectations for a rate hike.

Imports climbed 2.4 per cent to $49.77-billion, their sixth consecutive gain, on increased purchases of aircraft and other transportation parts.

Exports rose 1.3 per cent in May from April to hit $48.69-billion, thanks to shipments of unwrought gold to the United Kingdom as well as motor vehicles and parts.

Export Development Canada Chief Economist Peter Hall said eight of the 11 main export sectors had grown for three months in a row.

“This is really strong evidence of a broadly based increase,” he said. “It gives us confidence that there is real muscle behind this.”

Exports to the United States, which accounted for 74.5 per cent of all Canadian exports in May, dipped by 0.3 per cent, while imports from the southern neighbour rose 3.6 per cent. As a result, Canada’s trade surplus with the United States shrank to $3.53-billion from $4.76-billion in April...

This is excerpted from 6 July 2017 edition of The Globe and Mail.


Topic(s): 
Exports
Information Source: 
Canadian News Channel