MNI DATA IMPACT: Canada Trade Improvement Not as Good as Gold

By Greg Quinn

     OTTAWA (MNI) - Canada's shrinking April trade deficit adds to evidence of

faster economic growth in the second quarter, a boost that may not last amid

signs the U.S. is escalating tensions with Mexico and China. 

     Statistics Canada said the April deficit of C$966 million was the smallest

in six months, and it also pared the March estimate to C$2.3 billion from C$3.2

billion. The economist consensus for April was for a C$2.8 billion shortfall.

     Here are some of the key takeaways from the data released Thursday:

     - The export rise of 1.3% was slower than March's 4.4% increase, and was

led by a surprise jump in gold sales to overseas banks that will be hard to

sustain in future reports. Energy exports fell 0.5% as natural gas prices

tumbled, while non-energy exports climbed 1.8%. 

     - Imports fell 1.4% in April, and like exports the details suggested

one-time factors that may not shrink the trade deficit from here. Both aircraft

and pharmaceutical imports dropped on the month from record highs set earlier

this year.  

     - The smaller trade deficit still means that second-quarter economic growth

will quicken to an annualized pace of at least 2%, economists estimate. That

will improve on first-quarter growth of 0.4% that was blunted by foreign trade.

The trade gain also supports the Bank of Canada's view given when it held its

benchmark rate at 1.75% on May 29 that the economy was picking up speed. The BOC

has estimated second-quarter growth at 1.3%.

     - Canadian exporters face obstacles beyond April. The U.S. is threatening

to impose trade sanctions on Mexico, something that could delay ratification of

a new trade deal between those two nations and Canada. Trade relations between

Canada and China have suffered since the arrest of a business leader in

Vancouver, and the April report showed canola exports to China have sunk to

zero. 

     - Another soft spot is Canada's year-to-date trade deficit of C$10.2

billion, the second largest on record after the C$10.9 billion record set in

2016.

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

--MNI Washington Bureau; tel: +1 202-371-2121; email: kevin.kastner@marketnews.com

[TOPICS: MACDS$,M$C$$$]