Canada's Trade Surplus Hits Four-Year High in June

• Canada's trade surplus widened to C$3.86Bn in June, the highest level since May 2022 and the fourth consecutive monthly surplus, beating economists' forecast of C$3.00Bn. According to Statistics Canada, a weaker Canadian dollar helped inflate the value of both exports and imports.
• The average value of the Canadian dollar fell by 1.7 U.S. cents compared with May, marking its largest monthly decline since October 2022. In Canadian dollar terms, exports rose 0.4%, and imports edged up 0.2%, while in U.S. dollar terms, exports and imports declined 2.0% and 2.1%, respectively.
• Export growth was driven in part by a 16.5% increase in shipments of metal and non-metallic mineral products, although this was largely offset by a 10.0% decline in energy exports due to lower prices. Overall export volumes rose 1.1%, while import volumes fell 1.5%.
• Imports were supported by higher purchases of processing units used in data centres, while economists noted that the June trade data reinforced expectations that real GDP will rebound after flat growth in the previous quarter. Canada's export credit agency, Export Development Canada (EDC), also expects stronger shipments of gold and automobiles in the second half of the year.
• Although Canada is seeking to diversify trade in response to U.S. tariffs, it remains heavily reliant on the U.S. market, with 69.5% of exports destined for the United States in June. Canada's trade surplus with the U.S. narrowed to C$9.98Bn from C$11.12Bn in May, as U.S. imports rose faster than exports.
• The fourth consecutive monthly trade surplus should help boost overall growth, with economists expecting real GDP to rebound in the second quarter. However, TD Economics cautioned that trade flows remain "noisy," with energy, automobiles, gold and computers.

(Source: Reuters)