UPDATE 2-Export renewal cuts Canada's May trade gap to near zero

Thu Jul 3, 2014 11:12am EDT
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(Adds analysts' comments on implications for growth and the Bank of Canada)

By Randall Palmer

OTTAWA, July 3 (Reuters) - A resurgence in Canadian exports after they were hampered by plant maintenance helped cut the country's trade gap to C$152 million ($143 million) in May from C$961 million in April, despite record imports, Statistics Canada said on Thursday.

Exports rose by 3.5 percent to the second highest level ever at a seasonally adjusted C$44.17 billion, exceeded only in July 2008, with volumes up 4.2 percent. Analysts, however, were divided on the impact of the trade upturn on Canada's still-tepid economic growth.

"Unfortunately, that rebound was heavily influenced by certain one-off factors and is therefore unlikely to convince the Bank of Canada that its long-awaited export revival is at hand," said David Madani, Canada economist at Capital Economics.

Bank of Montreal senior economist Benjamin Reitzes offered a brighter view: "While trade may not add much to growth in (the second quarter), the improving trend in exports bodes well for the rest of 2014."

Imports rose at 1.6 percent, less than half the pace of export growth, but at C$44.32 billion they nonetheless topped April's record C$43.62 billion.

The trade balance ran four months of deficit from October 2013, then returned to surplus in February and March before tipping back into deficit in April, largely because maintenance slowed production at refineries and car plants.