Gloomy trade figures likely to hit growth
By David Ljunggren
OTTAWA (Reuters) - Slumping exports propelled Canada to a much larger trade deficit than expected in June, most likely slashing second-quarter growth figures to well below already modest predictions.
In a largely gloomy report, Statistics Canada said on Thursday that the trade deficit grew to C$1.56 billion in June from a revised C$1.04 billion in May. Analysts had expected a deficit of C$1 billion.
"The drag from net exports, in conjunction with the overall deterioration in confidence, will weigh heavily on the second quarter ... (which) will fall well below the Bank of Canada's 1.5 percent forecast," said Mazen Issa of TD Securities.
Canada relies heavily on exports, which accounted for around a third of real gross domestic product in 2010.
Exports fell by 1.7 percent from May while imports dropped by just 0.2 percent. After adjusting for inflation, real exports fell by 1.7 percent while imports were up 0.8 percent.
In part, the figures reflect continuing supply disruptions caused by the Japanese earthquake.
But they also underline manufacturers' problems in dealing with a strong Canadian dollar, which hit a 3-1/2 year high last month, and weak demand in the United States, by far Canada's biggest export market.
Exports to the United States fell by 2.4 percent while imports dropped 2.3 percent. The bilateral trade surplus slipped to C$3.63 billion from C$3.73 billion in May and the deficit with all other nations hit a record C$5.19 billion. Continued...