-Bank of Canada
Canada's merchandise trade deficit unexpectedly increased to the second largest on record in May, adding to signs that weakness caused by an oil shock has extended beyond the first quarter. Exports declined 0.6%, while imports rose 0.2% in May, resulting in a C$3.3 billion deficit, and marking the eighth trade gap in a row. Meanwhile, April's figure was revised up from C$2.974 deficit to C$2.992. The cumulative 2015 total trade deficit of $13.6-billion is a record, exceeding the next highest, in 2009, of $2.95-billion. The volume of exports plunged 2.5% in May while import volumes rose 0.3%, Statistics Canada said. Meanwhile, the trade surplus with Canada's largest trading partner, the US, narrowed to C$2.1 billion, as exports fell 0.3% and imports rose 0.5%. In comparison, Canada's trade gap with countries other than the US widened to C$5.5 billion in May, as exports dropped 1.6% and imports edged down 0.2%.
The report adds to pressure on Bank of Canada Governor Stephen Poloz to cut interest rates on July 15 for the second time this year, as an expected recovery in non-energy exports fails to materialize. On multiple occasions the central bank stressed that non-energy exports will support the Canadian recovery, highlighting machinery and equipment, metal products, building and packaging materials, aerospace, and pharmaceuticals. However, the non-energy products remain subdued.
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