Strength­en­ing econ­omy

Im­ports, ex­ports hit record highs

The Guardian (Charlottetown) - - BUSINESS - BY CRAIG WONG

Canada’s im­ports and ex­ports both reached record highs in May, Statis­tics Canada said Thurs­day, the lat­est sign of strength in the econ­omy ahead of ex­pec­ta­tions that the cen­tral bank may be days away from rais­ing its in­ter­est rate tar­get.

The trade deficit dou­bled to $1.1 bil­lion in May from a $552-mil­lion deficit the month be­fore, though that was fu­elled by the im­port of five new air­lin­ers. Econ­o­mists had ex­pected a deficit for May of $530 mil­lion, ac­cord­ing to Thom­son Reuters.

“There is a lot of noise to fil­ter through in to­day’s trade re­port but we think the mes­sage on ex­ports is ul­ti­mately pos­i­tive,” Royal Bank econ­o­mist Josh Nye wrote in a re­port.

Im­ports rose 2.4 per cent to $49.8 bil­lion in May, led by a 45.9 per cent in­crease in the air­craft and other trans­porta­tion equip­ment and parts cat­e­gory due to the new air­lin­ers.

Ex­ports climbed 1.3 per cent to $48.7 bil­lion, buoyed by ship­ments of un­wrought gold to the United King­dom.

Ex­ports of en­ergy prod­ucts in­clud­ing crude oil fell 9.0 per cent to $8.0 bil­lion as both prices and vol­umes de­clined. Ex­clud­ing en­ergy prod­ucts, ex­ports rose 3.6 per cent.

Nye called it a “solid in­crease” in non-en­ergy ex­ports for May and noted that they are now up rel­a­tive to a year ago.

“A price-re­lated de­cline in oil ex­ports be­lies what has been a fairly strong in­crease in en­ergy ex­port vol­umes year-to-date,” Nye said.

“That sup­ports the Bank of Canada’s view that ad­just­ment to lower oil prices is now largely com­plete.”

Spec­u­la­tion that the Bank of Canada could raise its key in­ter­est rate next week has mounted in re­cent days. Gover­nor Stephen Poloz re­cently said that in­ter­est rate cuts made in 2015 ap­peared to have “done their job,” not­ing that the econ­omy en­joyed sur­pris­ingly strong growth in the first quar­ter of this year.

The trade fig­ures came as Statis­tics Canada also re­ported that Cana­dian mu­nic­i­pal­i­ties is­sued $7.7 bil­lion worth of build­ing per­mits in May, up 8.9 per cent from April.

Bank of Mon­treal chief econ­o­mist Doug Porter said the over­all trade fig­ure was mod­er­ately dis­ap­point­ing, but the de­tails in the re­port were de­cent.

“Most im­por­tantly, trade still looks to make a small pos­i­tive con­tri­bu­tion to se­cond quar­ter growth and ex­ports hit record highs in both nom­i­nal and vol­ume terms in the month,” Porter wrote in a re­search note.

“While it may not be ex­actly what the doc­tor or­dered, it’s likely enough to keep the Bank’s ex­pected rate hike on track, es­pe­cially paired with a whop­ping 8.9 per cent spike in build­ing per­mits in the month.”

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