By Robb M. Stewart
OTTAWA--Canada racked up a third straight monthly goods-trade deficit with the rest of the world in May, with the shortfall widening as a retreat in shipments of natural resources added to export weakness.
The country posted a merchandise-trade deficit in May of 1.93 billion Canadian dollars, the equivalent of about US$1.41 billion, Statistics Canada said Wednesday. That was the largest deficit since last June and wider than the C$1.27 billion expected by economists.
April's deficit was revised upward by $276 million to $1.32 billion.
Exports of goods dropped 2.6% for the month to the lowest level since July after rising in April, while imports slipped 1.6% from the previous month, the government agency said. Exports were 1.7% lower and imports fell 1.3% in price-adjusted, or volume, terms.
Canada's economy returned to growth in the first quarter of the year after stalling in the second half of 2023, but while gross domestic product at the industry level picked up in April, an advance estimate suggests the economy lost momentum in May as weakness in retail and wholesale trade partially countered increased output in manufacturing, real estate and rental and leasing, and finance and insurance.
The Bank of Canada last month became the first Group of Seven central bank to offer rate relief to borrowers, trimming a policy interest rate that had remained at a more than two-decade high for almost a year. Economists are divided on whether the Bank of Canada will follow up with a second cut later this month after annual inflation unexpectedly accelerated in May but remained just inside the bank's 1% to 3% target window for a fifth consecutive months.
The latest merchandise trade data showed exports were down across most products tracked by the data agency.
Shipments of ores and minerals were down sharply from the prior month, with a sharp drop in purchases abroad of unwrought gold that continued the volatility seen in recent months. Still, lower volumes drove the decline in May whereas swings in prices were behind large variations in the early months of the year.
A headwind from lower crude oil prices weighed on Canada's energy exports in May, when volumes were essentially flat. Energy exports were down 2.4% for the latest month to C$13.99 billion.
There also was a big decline in exports of aircraft but a 3.6% rise in shipments of motor vehicles and parts after falls the previous two months, with higher sales of Canadian-made light trucks to the U.S.
Overall exports to the U.S., Canada's biggest export market by a wide margin, were up 0.8%, while imports were down 1.7%, in part because of a decrease in light truck imports from the U.S. That widened Canada's surplus with its neighbor to C$8.2 billion from $7.11 billion the month before.
Exports to countries other than the U.S. declined 12.9% in May, the sharpest decline on records that date back to 1997, the agency said. That included lower unwrought gold exports to the U.K., a fall in copper and natural gas liquids shipments to Japan and a drop in exports of transportation equipment to Saudi Arabia.
On the imports side, purchases from countries other than the U.S. were down 1.4%, which widened Canada's trade deficit excluding its neighbor to roughly C$10.1 billion from C$8.4 billion in April.
When international trade in goods and international trade in services were combined, Canadian exports fell 1.9% and imports declined 1.3%. As a result, Canada's trade surplus incorporating both goods and services widened to C$2.95 billion in the latest month from C$2.46 billion in April.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
07-03-24 0853ET
