Canada posted a narrower trade deficit in April, as results were buoyed by export growth to the U.S. that led to the largest trade surplus with its biggest trading partner in nearly three years.
Canada's merchandise trade deficit with the rest of the world in April narrowed to a seasonally adjusted 370 million Canadian dollars ($274.1 million), Statistics Canada said Friday, compared with an upwardly revised C$936 million shortfall in the previous month. The previous estimate indicated a C$135 million trade deficit in March.
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Market expectations were for a small deficit in April of C$20 million, according to economists at Royal Bank of Canada.
In April, exports climbed 1.8% to C$47.69 billion, as eight of 11 sectors tracked posted gains. Meanwhile, imports climbed 0.6% to C$48.06 billion.
In volume, or price-adjusted, terms, exports increased 1.1% and imports fell 0.3%.
On a year-over-year basis, exports climbed by a healthy 14.7% while imports rose 7.4%.
Meanwhile, U.S. trade figures were also released Friday, and indicated the U.S. trade deficit in goods and services widened in April to $47.62 billion as U.S. consumers stepped up purchases of foreign goods.
Economists said the bigger-than-anticipated trade deficit was due entirely to a significant revision in the prior month. The underlying data were encouraging and suggest the second quarter is on track for economic growth of 2.5% to 3% annualized, TD Bank said.
"The gain in exports -- particularly in volumes -- was a solid sign that the economy carried momentum into the second quarter after a scorching start to the year," said Nick Exharos, economist at CIBC World Markets.
Canada is the U.S.'s second-largest trading partner, with two-way trade in 2016 totaling C$752.2 billion. Roughly three-quarters of all Canadian exports -- accounting for about 20% of Canada's economic output -- are U.S.-bound.
In April, Canada recorded a C$4.95 trade surplus with the U.S., or the biggest surplus since May 2014, as exports grew 5.4% while imports climbed 1.1%. The Canadian dollar weakened against the U.S. currency in the month, giving Canadian-made goods a boost as they were cheaper to purchase in American dollars.
Excluding the U.S., Canada ran a C$5.32 billion trade deficit with all other countries.
The Trump administration has vowed changes to U.S. trade policy in an effort to protect jobs and lure companies back to the U.S., citing large trade deficits with countries such as China, Germany and Mexico as evidence that a revamp is necessary. The U.S. trade deficit with Canada is the smallest among America's major trading partners, and this week Commerce Secretary Wilbur Ross said Canada was largely "blameless" because the U.S. imports Canadian crude to meet its energy needs.
April's trade report said energy exports rose 2.5% to C$8.75 billion, in part due to higher prices for natural gas and demand for coal. Excluding energy, Canadian exports still rose 1.7%. Also driving April results were a 4.4% advance in motor vehicles and parts, to C$8.11 billion, and a 4.7% gain in forestry products and building materials, to C$3.75 billion.
Despite recent strength, trade was one of the few dark spots in a stellar report on Canada's gross domestic product report released this week. The economy grew 3.7% annualized in the first quarter, or tops among the Group of Seven countries in the three-month period, even though net trade was a drag. In the quarter, exports edged downward, 0.1%, while imports rose 3.3%.
In a rate-policy decision last week, the Bank of Canada took a more upbeat tone regarding the economic outlook with one caveat -- that export growth was "subdued in the face of ongoing competitiveness challenges." Some economists said this may have been signaling the central bank was prepared to keep its policy rate lower for longer amid better economic data in an effort to limit a rise in the Canadian dollar, and in turn provide more support for exporters.
Write to Paul Vieira at email@example.com
(END) Dow Jones Newswires
June 02, 2017 10:04 ET (14:04 GMT)