UPDATE 2-Canada June trade gap shrinks, exporters still struggling

Tue Aug 6, 2013 10:25am EDT
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* Canada exports rise 1.4 percent, imports up 0.6 percent

* Deficit for first half of year second highest on record

By David Ljunggren

OTTAWA, Aug 6 (Reuters) - Canada's trade deficit in June shrank as exports grew more than twice as fast as imports but the shortfall for the first half of the year was the second highest on record, reflecting the serious challenges exporters face.

The trade deficit - the 18th in a row - dropped to C$469 million ($451 million) from a revised C$781 million in May, Statistics Canada said on Tuesday. Analysts had predicted a deficit of C$500 million.

Canada's export sector, a key driver of the economy, has been hit by weak markets and a strong Canadian dollar. The cumulative trade deficit for the first half of the year was C$4.39 billion, the second highest January-June shortfall on record after the C$4.72 billion posted in 2012.

Both imports and exports had slumped in May and analysts said the June trade figures were unlikely to help boost second-quarter growth data, which are due to be released on Aug 30.

"Net exports are on track to exert a very modest drag on GDP growth in the second quarter. That said, we look for that to turn positive over the balance of the year," TD Securities strategist Mazen Issa said in a note to clients, citing the likelihood of a U.S. recovery.

The Bank of Canada predicted on July 17 that second-quarter growth would be just 1 percent, a forecast several banks think is too pessimistic. First-quarter growth was 2.5 percent.   Continued...