Canada's trade performance worsened for the third consecutive month in June—to the worst monthly deficit in almost two years.
Statistics Canada reports the merchandise trade loss nearly doubled to $1.8 billion during the month, from an upwardly revised $954 million in May.
But, the bottom line was nearly twice economists' expectations, with analysts noting the picture is not as bleak as data suggests. The reported shortfall was entirely on the import side, which saw a 2.3% gain.
Exports were mildly positive, growing 0.2%, and were even stronger in volume terms, which jumped 1.1%. However, all the gain came from the auto sector, which stamped out a five-year best 13.9% increase.
The increase in export volumes may indicate the economy is holding up well. The imports bump could point to increased domestic activity as well, says David Madani of Capital Economics.
Still, BMO economist Doug Porter says it's difficult to see trade as anything but a negative going forward. For the three-month period ending June, Canada's deficit totaled $3.3 billion, versus a $2.2 surplus in Q1 2012.
"Net trade will likely cut 1.5 percentage points from GDP (gross domestic product) growth in Q2, prompting us to shave our Q2 estimate of growth by a tenth to 1.7%," he says.
"The good news is commodity prices have bounced since from their late-June lows, which will provide support for Canadian export receipts if volumes hold up."
Additional economic indicators offer a mixed picture for economic prospects; for instance, new home starts in Canada fell to 208,500 units in July, but remained healthy; and the U.S. printed its lowest trade deficit in 18 months, which is good for Canada.
"Global factors have had a knock-on effect, with commodity prices down sharply," said Bank of Canada governor Mark Carney in a BBC interview. "There's an adjustment and fairly synchronized deceleration of the global economy occurring."
Originally published on Advisor.ca