- Stephen Harper, Canada's Prime Minister
Canada's current account deficit shrank slightly in the second quarter due to more favourable trade in goods and services. The country's current-account deficit narrowed to C$17.40 billion, after an upwardly revised expansion to C$18.1 billion in the first quarter, Statistics Canada. The previous estimate showed a deficit of C$17.47 billion. The first-quarter figure remains the second-biggest deficit on record, trailing only a C$19.57 billion shortfall registered in the third quarter of 2010. A strong increase in exports in June helped to offset drops in April and May, and trim the trade in goods deficit to C$6.74 billion from C$7.07 billion in the first quarter. Overall exports of goods rose C$680 million to C$128.83 billion, largely due to higher prices. Total imports of goods increased by C$350 million to C$135.57 billion, in part due to higher shipments of motor vehicles and parts. The deficit on trade in services contracted by C$240 million to C$5.49 billion as non-residents boosted their spending in Canada.
In July, the Bank of Canada responded to weakening domestic growth, falling business investment and sluggish non-energy exports by cutting its interest rate from 0.75% to 0.5%. The central bank also downgraded its Q2 growth forecast from a positive 1.8% to a negative 0.5% and downgraded the Q3 recovery from 2.8% to 1.5%.
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