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Free AccessMNI DATA ANALYSIS: Canada Growth Rotation Happening
By Yali N'Diaye
OTTAWA (MNI) - The latest set of data show that the Canadian economy has
been relying more on exports, indicating the growth rotation is happening, at
least on the export front:
--STRONGER EXPORTS
The merchandise trade deficit narrowed to C$0.6 billion in June from C$2.7
billion in May, the smallest deficit since January 2017.
The improvement was led by exports, which were up 4.1% in June, the largest
gain since November 2016, to reach a record high value of C$50.7 billion. Sales
abroad only declined in January and May this year.
Export volumes rose 2.1%, more than offsetting the 1.9% contraction in May,
and translating into a 3.8% gain in the second quarter.
--EXPORT UP DESPITE US TARIFFS
Gains in exports occurred in the face of newly imposed U.S. tariffs on
imports of Canadian steel (25%) and aluminum (10%), showing Canadian exporters
benefited from stronger U.S. demand.
On a customs unadjusted basis, total exports rose 1.9% in June after a 7.3%
gain in May. However, steel exports to the U.S. plunged 36.8% after surging
40.0% from February to May, and compared to an average June decline of 0.2%.
Aluminum exports to the U.S. fell 7.0% on the month after rising 28.5% from
February to May, compared to an average June decrease of 2.3%. Excluding steel
and aluminum, exports were up 3.0% on the month.
Canada retaliated with tariffs on imports of steel, aluminum and other
products from the U.S., which went into effect on July 1 and will begin to show
up in next month's data. It remains to be seen how Canadian importers will
react. According to data obtained by MNI, imports of U.S. steel surged 32.1% in
June on a customs unadjusted basis, while imports of U.S. aluminum rose 1.7%.
--BUSINESS INVESTMENT
Meanwhile, on the domestic front, imports of industrial machinery,
equipment and parts rose 2.2%, a positive sign for business investment,
especially as NAFTA talks linger, still representing a drag.
Imports of industrial machinery, equipment and parts have been posted gains
in four out of the first six months this year, including May (+1.7%) and June.
The key question remains how tariffs will impact exports and trade between
the U.S. and Canada going forward, and whether it could prevent further growth
rotation towards more reliance on exports and business investment.
--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com
[TOPICS: M$C$$$]
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.