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Trade deficit narrows as industrial and manufactured goods exports surge             

Canadian exporters had another strong month in July, buoyed by higher sales of manufactured and consumer goods. Merchandise exports rose by 2.7 per cent compared to June, building on last month’s impressive 5.5 per cent increase. At $45.5 billion for the month, July’s export totals are the highest Canada has seen in a year.

While imports have also been rising – by 1.7 per cent in July – the recent surge in exports has dramatically improved Canada’s balance of trade. In March 2015, Canada posted an all-time record monthly trade deficit of $3.4 billion. The trade deficit remained in the $3.0-billion range for two months, but has narrowed considerably since, falling to $593 million in July.

The improvement in Canada’s export performance comes despite continued weakness in the energy sector. Crude oil exports were down 6.2 per cent in July, while refined petroleum sales fell by more than 15 per cent. That trend should continue into August as the drop in oil prices that month will lower the value of those exports even further.

The good news is that Canada’s non-energy exports have finally begun to take off. After four consecutive months of declines, exports of non-energy products have soared in each of the past two months. Buoyed by a lower exchange rate and a resurgent US economy, shipments of those products were up 4.0 per cent in July, building on an even stronger showing in June, when they rose by 6.0 per cent. 

Those gains were heavily concentrated in industrial and manufactured goods. Exports of aerospace vehicles and parts rose 22.0 per cent in July, while motor vehicles and parts producers saw their foreign sales increase by 9.9 per cent. Industrial machinery exports were also up strongly, with a 5.5 per cent gain over June.

By contrast, exporters of raw goods and basic materials struggled in July. Raw metals exports were especially hard-hit as lower commodity prices contributed to a drop of nearly 29 per cent. Potash, fabricated metals, pulp, paper and building materials also saw exports decline.  

On a provincial basis, exports were up strongly in most provinces, with only Canada’s major energy exporters – Alberta, Newfoundland and Labrador, and New Brunswick – posting declines. Leading the way was Ontario where manufactured goods exports contributed to a 21.8 per cent increase in exports in just one month. BC exporters also enjoyed a 19.3 per cent increase. Saskatchewan, Manitoba and Quebec all saw double-digit growth as well.

Canada’s largest market access gains in July came in Switzerland, where exports tend to be volatile from one month to the next, reflecting large-order shipments of aerospace products. Exports to Hong Kong, Taiwan and India were all considerably higher as well. Sales to the United States were also up 2.0 per cent in July, adding to a 6.2 per cent increase in June. 

On the import side, sales of foreign goods into Canada were up in eight of the eleven major product categories. Leading the way were higher imports of crude oil into Eastern Canada (12.8 per cent growth compared to June), as well as aircraft and motor vehicle parts. Imports of consumer goods, food products and metal/mineral products were all lower.

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