Canada posts wider-than-expected trade deficit in July

FILE PHOTO: Shipping containers are picture in St John's, Newfoundland and Labrador, Canada, October 17, 2018. REUTERS/Chris Wattie

TORONTO (Reuters) - Canada posted a wider-than-expected trade deficit in July as imports rose and exports declined, data from Statistics Canada showed on Wednesday, a sign that the boost to the domestic economy from trade in the second quarter may not be repeated.

Canada’s trade deficit was C$1.12 billion ($0.84 billion) in July, while the prior month’s surplus was revised to show a C$0.06 billion deficit. Analysts had forecast a deficit of C$0.40 billion in July.

“Canada’s trade balance took a dive into the red in July, playing into fears that Q2’s big growth driver, exports, would go missing in Q3,” Avery Shenfeld, chief economist at CIBC Capital Markets, said in a note.

Data on Friday showed that the Canadian economy expanded at a surprisingly strong annualized rate of 3.7% in the second quarter, a pace much higher than the Bank of Canada had predicted, thanks to a resurgence in goods exports.

The Bank of Canada was due to make an interest rate decision at 10 a.m. (1400 GMT). Money markets expect the benchmark interest rate to be left on hold at 1.75%. They do expect the central bank to ease by the end of the year. BOCWATCH

Exports edged down by 0.9% in July partly due to lower trade in crude oil, as well as farm, fishing and food products. Imports were up by 1.2%, largely on consumer goods and locomotive cars.

Exports to the United States fell 1.1%, while imports from the United States rose 1.6%, narrowing Canada’s trade surplus with its southern neighbor to C$4.6 billion.

Reporting by Fergal Smith; Editing by David Gregorio