Suddenly, Canadian exports are in demand
June’s 6.3% jump over May is biggest monthly increase since late 2006 With the U.S. economy gaining steam and the cheaper Canadian dollar, an export rebound was … in the cards.
After months of mounting trade deficits with the rest of the world, Canadian exports bounced back in June — and in a big way — recording the largest surplus in shipments in nearly a decade.
That’s welcome news for an economy that is now in a shrinking pattern and flirting with another recession.
For Canadian companies often criticized for not investing enough to support growth, with the country having to rely heavily on consumer spending to pull us out of the 2008-09 downturn, this could mark a long-awaited sea change.
Wednesday’s June export data — pointing to a 6.3 per cent jump from the previous month and representing the biggest increase since December 2006 — helped shave Canada’s overall trade deficit to $476 million from $3.38 billion in May, Statistics Canada reports. Imports, meanwhile, were down 0.6 per cent in June.
Shipments to the United States, ’s No. 1 trading partner, leaped 7.1 per cent and accounted for much of the rebound in total exports in June. Exports to countries other than the U.S. were up 3.8 per cent.
Overall, June’s export resurgence followed five straight monthly declines — including drops of 0.8 per cent in May and 0.4 per cent in April.
“With the U.S. economy gaining steam and the cheaper Canadian dollar, an export rebound was always in the cards,” said Krishen Rangasamy, senior economist at National Bank.
Export volumes were up by an annualized 0.7 per cent in the second quarter, while imports fell 1.4 per cent.
“The excellent handoff from June is positive for Q3 prospects,” he noted. “It’s unclear, however, if that was enough to prevent another GDP decline in Q2. That’s because of the massive drag generated by investment spending.”
In Wednesday’s report, Statistics Canada said shipments were up in most Canadian products and services in June — with the exception of exports in automobiles and aerospace equipment.
“Overall, manufactured exports were up by nearly seven per cent. There’s room for the factory sector to run higher,” said economist Nick Exarhos, at CIBC World Markets.
“As for resources, it’s encouraging to see that forestry products saw a significant 9.2 per cent increase in June,” he said.
“We’ve made the case that a key sector that should benefit from the improvements in the U.S. labour market should be housing, an important catalyst for one of Canada’s commodity exports at a time when the overall complex is severely depressed.”
Imports, on the other hand, were slowed mainly by a decline in shipments of aircraft and other transportation equipment, along with lower demand for energy products.
The Canadian economy has declined for five consecutive months, with most forecasters saying the country faces a recession — technically described as two straight quarters of negative growth.
Bank of Canada governor Stephen Poloz has acknowledge the threat posed by the year-long collapse of oil prices — one of the key commodities for driving Canadian growth — and still unsteady global expansion. He has attempted to ease the impact of those threats by cutting the central bank’s key interest rate twice this year, most recently on July 15.
“We have said from the beginning that while there would be both negative and positive effects from lower oil prices on Canada, the negative effects would dominate, and they would come first,” Poloz told reporters following the bank’s rate decision.
“The positives would be more gradual, taking the form of stronger consumer spending, both here and in the U.S., and increased non-resource exports, because of stronger U.S. spending and a lower Canadian dollar. These positives have been slow to emerge, but we can see them working.”