An increase in sales to the United States was the driver behind a 6.3% boost to Canadian exports, according to Statistics Canada data released August 5.
Analysts are pointing to this data as an indicator that the Canadian economy could rebound in 2015’s third quarter.
“Canada has likely skidded through the soft patch and is ready for a comeback over the next two quarters, with momentum in both consumer spending and exports underpinning our view of a rebound in economic growth,” TD Economics’ Diana Petramala said.
“While a further leg down in oil prices will continue to weigh on the oil sector in Canada, the non-energy sector is likely to continue to benefit from an improving U.S. economy and low Canadian dollar – which is currently at its lowest level since 2004.”
Canada exported $44.6 billion in June. Most of this –$34.2 billion – was related to sales to the U.S.
Export gains were seen across almost all categories. Consumer goods exports jumped 17.2% to almost $6 billion, and exports of metal and non-metallic products grew 10.8% to $5.1 billion.
The only sectors to see declines were motor vehicles and parts, down 0.6%, and aircraft and other transportation equipment and parts, down 3.9%.
Imports dipped 0.6% in the month. The biggest declines were in aircraft and other transportation equipment and parts (down 19%) and energy products (down 10.4%).
As a result of decreasing imports and the growth in exports, the country’s merchandise trade deficit with the world narrowed to $476 million in June from $3.4 billion in May.
This deficit is nearly $2.5 billion lower than the market had been expecting, said CIBC Economics’ Nick Exarhos.
This data makes a rate cut less likely, Petramala said, with the Bank of Canada expected to hold the overnight rate steady at 0.5% until mid-2017.
Overall, according to Benjamin Reitzes, senior economist and vice-president of economic research for BMO Capital markets, June’s rebound in exports is a good sign but not a signal the Canadian economy is totally out of the woods.
“Expect this to be the start of meaningfully better June data, though it’s a stretch to anticipate continued gains of this size for exports in the months ahead,” Reitzes said.
“In addition, the strong June trade figures provide a nice jump-off point for Q3, giving us more confidence in our call for a solid rebound in Q3 GDP growth.”
The Canadian dollar reacted with a jump to 76.19 cents U.S., but as of press time it had dropped back down below the 76-cent mark to 75.8 cents U.S.
