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Exports fell for the fourth time in five months in June as Canada posted its largest trade deficit since late 2020, with the results supporting expectations of a significant slowdown in second-quarter growth.
Statistics Canada released data on Aug. 8 that showed the trade deficit widened to $3.7 billion in June from $2.7 billion in May. Analysts had forecast a deficit of $2.8 billion.
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The national data agency tracked a decline in exports in nine of 11 categories including in metals, down eight per cent, and motor vehicles, down 1.1 per cent. Canola exports fell 42.4 per cent, erasing gains made following Russia’s invasion of Ukraine.
Imports fell a smaller 0.5 per cent month over month, mostly on decreases in energy products and consumer goods, down 13 per cent and two per cent, respectively.
The trade numbers have economists projecting GDP in the second quarter fell to 1.2 per cent on an annual rate from 3.1 per cent annual rate in the first quarter.
“Weaker global demand and the fading boost from easing supply shortages took a toll on exports in June, confirming that net trade weighed on second-quarter GDP growth,” said Olivia Cross, an economist at Capital Economics in a note.
The data for June showed the picture flipped in the second quarter, said TD economist Marc Ercolao in a note on Aug. 8.
In the second quarter, real export volumes fell 0.4 per cent quarter over quarter, meanwhile real imports rose 0.9 per cent. In the first quarter, exports were up 10 per cent annualized from the quarter before with imports flat.
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“This suggests that trade activity could be a net drag on second quarter GDP, due for release at the end of this month,” Ercolao said in his note.
Statistics Canada also said in its release that it expected the recently resolved B.C. port strike and flooding in Nova Scotia would take their toll on July trade numbers that will lead off the third quarter.
For 2022, 9.2 per cent of exports and five per cent of imports by value were shipped through British Columbia via marine transportation, the agency said.
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In Nova Scotia, flooding disrupted a section of rail that serves the port of Halifax. StatCan said the port was responsible for clearing 1.4 per cent of Canada’s total merchandise import value and 0.8 per cent of total exports.
“Trade looks to weigh on second quarter growth, with momentum at the end of the quarter pointing to a weak hand-off to Q3,” said Shelly Kaushik, an economist at BMO Capital Markets, in a note on Aug. 8.
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