- Mark Chandler, head of Canadian fixed-income and currency research at RBC Capital Market
Canada's trade shortfall with the rest of the world unexpectedly contracted in June, led by strong exports of consumer goods. Exports surged the most in more than eight years, rising 6.3% in June. Consumer goods, which soared by a record 17.2%, was the main contributor to the increase. Export volumes rose by 4.8% while prices advanced by 1.5%. At the same time imports dropped 0.6%, resulting in a C$476 million deficit, according to Statistics Canada. Economists had expected the trade gap to narrow to C$2.6 billion from a downwardly revised C$3.4billion. Exports to the US, which made up 76.7% of Canada's global total in June, advanced 7.1%, while imports declined 0.9%. As a result, Canada's trade surplus with the US rose to C$4.69 billion from C$2.15 billion in May.
In July, The Bank of Canada responded to altering domestic growth, falling business investment and moribund non-energy exports by cutting its key interest rate from 0.75% to 0.5%. The central bank also revised its growth forecast for the second quarter from a positive 1.8% to a negative 0.5%, and downgraded Q3 rebound from 2.8% to 1.5%. The latest Canadian GDP data shocked with the fifth contraction this year in May, falling 0.2%, driven by weak manufacturing, as well as sluggish oil and gas extraction.
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