Canada's trade deficit unexpectedly widened in June from the previous month to hit the fourth-biggest on record, as exports fell steeply on lower shipments of precious metals and energy.
The report marks a rare setback for the Canadian economy, which has been on a roll over the past year -- prompting the Bank of Canada to raise its benchmark rate last month for the first time in seven years on growing confidence on the outlook.
"The trade report was pretty bad," said Benjamin Reitzes, economist at BMO Capital Markets.
Canada's merchandise trade deficit in June grew to a seasonally adjusted 3.60 billion Canadian dollars ($2.86 billion), Statistics Canada said Friday, compared with a revised C$1.36 billion shortfall in the previous month. Markets were anticipating a C$1.25 billion trade shortfall in June, according to economists at Royal Bank of Canada.
Canada's monthly trade data covers the export and import of goods, and doesn't include services.
In June, exports declined by a hefty 4.3% to C$46.51 billion, or the biggest month-over-month decrease in 16 months. The drop followed three straight monthly record highs for exports. On a one-year basis, exports jumped 12.4%.
Imports in June grew 0.3% to C$50.12 billion.
In volume, or price-adjusted terms, exports fell by 1.7%, reflecting price declines among commodities. Import volumes rose 0.8%.
Meanwhile, U.S. trade figures were also released Friday, and indicated the U.S. trade deficit in goods and services narrowed sharply. The trade deficit with other nations contracted 5.9% from a month earlier to $43.64 billion, the Commerce Department said. The deficit fell because exports rose 1.2% while imports fell 0.2%.
Canadian exports to the U.S. fell 4.5% in June to C$34.52 billion, mostly on lower energy sales. For Canada, this means the smallest trade surplus in goods with the U.S., its largest trading partner by far, in a year. Renegotiations of the North American Free-Trade Agreement start later this month, and the Trump administration has put a priority on reducing the trade deficits it runs with Mexico and Canada.
Canadian imports of U.S. goods also fell, 0.7% to C$32.36 billion.
The June trade report for Canada was skewed partly by precious metals. Metal and nonmetallic mineral products declined 14.9% to C$5.27 billion. The data agency said this could be attributed to a drop in sales of unwrought gold to the U.K., which hit a record in the previous month.
Sales abroad of energy products fell 9.2% to C$7.30 billion, on weaker-than-normal demand for crude oil. Prices for energy products fell 6.1% in the month.
Nonenergy exports fell 3.4% in June.
Mr. Reitzes said the one-time factors impacting both exports and imports, in particular gold and energy, "make it tough to get a clear picture" on the economy, adding the June trade data is unlikely for now to affect the Bank of Canada's view.
Write to Paul Vieira at email@example.com
(END) Dow Jones Newswires
August 04, 2017 10:03 ET (14:03 GMT)