Canadian Trade Surplus Widened in Value But Fell on a Volume Basis

August 12, 2008

Higher prices for oil and other commodities lifted the Canadian trade surplus to C$ 5.762 billion in June, matching consensus expectations.  However, the surplus in May was revised downward by 5.7% to C$ 5.22 bln, and both export volumes (-1.4%) and import volumes (-0.6%) declined.  The nominal value of energy exports rose 11.5%, while that of all other exports was 1.7% smaller than in May.  Exports of machinery and equipment tumbled 6.2%, while shipments of agricultural goods (-3.1%) and forestry products (-0.8%) dropped, too.  Export prices rose 4.5%.  A 7.4% increase in auto imports was mostly responsible for a 2.0% m/m rise in total import values.  The second-quarter merchandise trade surplus was C$ 1.9 billion bigger than the 1Q result.  If all other components are unchanged, that improvement can be expected to lift the current account surplus to 1.6% of Canadian GDP from 1.4% in the first quarter.  The surpluses will not remain so large in 3Q08, however, because of the sharp and continuing downturn in commodity prices.  No U.S. bilateral trade deficit deteriorated by more than that with Canada in June.  In fact, the overall U.S. trade gap narrowed unexpectedly and sharply to $56.77 billion, which should enhance revised second-quarter U.S. growth by almost a half percentage point.  One would think that would boost the dollar in a market, where improved sentiment for the U.S. currency has been seizing any excuse to buy lately.  No such luck.  The dollar instead has slipped both generally and vis-a-vis the Canadian dollar since U.S. and Canadian trade figures were announced at 12:30 GMT in a buy-the-rumor-sell-the-fact reaction.



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