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While Canada’s trade deficit was larger than expected in May, the deterioration was mostly due to temporary factors,” notes National Bank Financial’s Jocelyn Paquet.

Key quotes

“Energy imports swelled to compensate for temporary shutdowns at Canadian refineries. Imports in the aircraft category, for their part, were lifted by the delivery of  several airliners from the United States.”

“Turning to exports, delayed deliveries of engines and other auto parts from the U.S. suppliers created bottlenecks at Canadian assembly lines and hampered international shipments in the motor vehicles/parts category. Yet, even accounting for these impediments, the trend in auto exports remains concerning. Indeed, the first five months of the year C$24.9 billion worth of passenger cars and light trucks were shipped from Canada to the world, 14.6% less than in the same period last year.”

“Considering Washington’s latest threats regarding the possible imposition of  tariffs on automobile imports, we’ll keep a close eye on that sector moving forward. Despite the larger trade deficit in May, international commerce looks set to add to GDP in Q2 after five negative contributions in a row.”