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Nathan Janzen, senior economist at Royal Bank of Canada, notes that the Canada’s trade deficit printed $1.1 billion in July after revised $0.1 billion June shortfall as exports fell 0.9% largely due to lower energy prices while import volumes increased 2.1% on broadly based gains.

Key Quotes

“Details of the July trade numbers looked better than the deterioration in the balance alone might imply. Exports still look on the soft side, but edged up 0.1% in July controlling for price changes. They were still up 1.6% year-over-year in volume terms after a big 1.7% month-over-month drop last month, but with that year-over-year gain largely reflecting stronger energy shipments.”

“But import volumes also bounced back 2.1% after falling 3.5% in June.   Higher imports of consumer goods and equipment, the latter a key indicator of business investment spending, led the increase.”

“Stronger imports subtract from the net trade balance – and confirm that a huge add to GDP growth from net trade in Q2 won’t be repeated going forward. But they also are a sign that a decline in Q2 domestic demand won’t be repeated, at least in the near-term.”