‘How Canada’s trade picture is tracking into the second quarter will put yet more wind into the Bank of Canada’s sails.’ -Derek Holt, Scotiabank Economics.
Canada’s trade deficit widened almost two times fueled by gains in aircraft imports. Statistics Canada reported that the country’s trade gap came in at C$1.1B in May, up from the preceding month’s downwardly revised deficit of C$0.6B. However, the reading missed market projections for a C$0.5B trade deficit for the month. The trade balance report showed that the total value of exports posted a 1.3% monthly increase to C$48.7, while imports rose 1.3% to C$49.8 in May. On a yearly basis, exports rose 10.2% amid higher demand for unwrought gold from the United Kingdom. Meanwhile, total exports jumped 17.8% for the year due to more shipments of aircrafts, motor vehicles and parts. Imports from the United States grew to a record high of C$32.7B, while shipments to the southern neighbour fell 0.3% to C$36.3B. The weak data is expected to disappoint the Bank of Canada and postpone monetary policy tightening. However, businesses expressed optimism over the outlook for Canadian trade, while surging demand is set to lead to higher investment and hiring.
