Canadian and U.S. Trade Figures in July Both Weakened

September 11, 2008

Worsened trade positions in July were affected by the peak in oil prices and are not indicative of future trends.  The U.S. deficit of $62.2 billion was at a 16-month low but less than 5% above the 1H08 monthly average.  The year-to-date deficit widened just 1.0% from the first seven months of 2007.  Significant reductions in the year-to-date U.S. deficits with Asia and Western Europe mitigated the impact of a larger energy import bill.

Canada’s trade surplus fell 13.8% in July from a downwardly revised June surplus.  July’s C$ 4.86 billion surplus was also 11.3% smaller than the average monthly surplus in 2Q, when the current account surplus equaled 1.7% of GDP.  Canada imports oil but is a net energy exporter.  Energy exports and imports respectively soared 76.0% and 72.6% in the year to July, and the energy surplus narrowed by C$ 323 billion between June and  July to C$ 7.175 billion.  Non-energy trade generated a larger deficit in July, accounting for 58% of the incremental decline of Canada’s total trade surplus between June and July.  Exports of industrial goods and materials (+5.0%), machinery and equipment (+6.1%) and automotive equipment (+2.4%) experienced brisk month-on-month growth, but overall non-energy exports were unchanged from their year-earlier level in July 2007.  A 9.5% jump in automotive imports paced a 4.6% m/m rise in overall imports.  Much of the growth in exports came from gains in prices, not volumes.  Net foreign demand exerted a huge 2.8 percentage point drag on 2Q real GDP, which eked out a gain of just 0.3% saar after dropping 0.8% in 1Q08.  The Canadian dollar has depreciated 4.8% against its U.S. counterpart since midyear and 7.4% since the end of 2007.  The loonie is now trading roughly on a par with its average 2007 level of 1.0734 per U.S. dollar.

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