August 04, 2022 | 09:14
A Nominal Win
Canada's merchandise trade surplus widened to $5.0 billion in June from $4.8 billion (revised from $5.3 billion) in May. This is the country’s sixth straight month in surplus and, after the revisions to May, marks the largest surplus since 2008.
Exports increased 2.0%, led by energy products (+3.2%), though the increase was broad-based as non-energy exports (+1.4%) also rose. Exports of metal and non-metallic mineral products were up 6.5%, largely thanks to higher exports of refined gold to the U.K. Meantime, imports rose 1.7%, led by energy (+22.3%), thanks in part to higher prices. The increases more than offset a decline in auto imports (-6.8%) as ongoing supply chain issues weighed on production.
On a volumes basis, exports increased 1.7%, while imports edged up 0.1%. For all of Q2, exports climbed 9% annualized, and imports surged nearly 30% a.r., suggesting that trade will weigh heavily on GDP growth in Q2.
In a separate release, the service trade deficit widened to $1.3 bln in June from $1.1 bln in May.
Key Takeaway: Canada’s trade surplus grew to a sizeable $5.0 bln in June. While the streak of surpluses and solid headline are positives, it is entirely due to higher commodity prices, particularly in energy, as the real trade balance deteriorated for a third consecutive quarter. We'll see what Q3 brings, but the better end to Q2 points to trade potentially becoming a positive for growth in the quarter.