Canada trade deficit hits record, housing slows
By Ka Yan Ng
TORONTO (Reuters) - Canada had a record high monthly trade deficit in July and the housing market stalled, data released on Thursday showed, signaling sputtering economic growth as the third quarter got under way.
The weaker data came a day after the Bank of Canada raised its key interest rate by a quarter point for a third straight time this year, bringing the rate to 1 percent. But the bank also cautioned that a weak U.S. economy would hamper Canada's recovery.
The Canadian dollar held at three-week highs against the U.S. dollar on Thursday, despite the soft data, while bonds stayed lower.
Canada's trade deficit rose more than three times expected to C$2.74 billion ($2.66 billion) in July as exports to the United States sank because of anemic demand, while overall imports surged to their highest level since November 2008, Statistics Canada data showed.
The shortfall compared with a deficit of C$810 million that was forecast by analysts in a Reuters poll.
Statscan also revised its estimate of the June trade deficit to C$1.81 billion from C$1.13 billion.
Exports fell 0.7 percent to C$32.80 billion in July, dragged down by weak demand for machinery and equipment and forestry products. But analysts were heartened by another jump in imports, up 2 percent to C$35.54 billion, led by energy products and autos, and above the forecast of C$34.70 billion.
"If anything, the continued surge in real imports of machinery and equipment early in Q3 will reinforce the statement made by the Bank of Canada that sees business investment rising strongly in the coming months," said Stefane Marion, chief economist at National Bank Financial. Continued...