Canada posts unexpected trade deficit in May as exports falter

·1 min read
A truck moves past stacked shipping containers at the Port of Montreal

By Julie Gordon

OTTAWA (Reuters) -Canada posted a surprise trade deficit of C$1.39 billion ($1.12 billion)in May, missing analyst expectations of a small surplus, as imports increased and exports fell, Statistics Canada data showed on Friday.

Analysts polled by Reuters had predicted a surplus of C$370 million following a revised C$460 million surplus in April.

Imports jumped 2.1%, mostly on imports of metal and non-metallic mineral products, which reached a record level in May, Statscan said. Imports of consumer goods also jumped, with pharmaceutical imports - including COVID-19 vaccines - contributing.

Exports, meanwhile, dropped 1.6% in May, with exports of motor vehicles and parts falling again as the global semiconductor chip shortage continued to hit production. There was also a plunge in exports of consumer goods as April's seafood surge reversed.

While exports were weaker than expected, it was largely due to global supply disruptions rather than weakening demand for Canadian products, economists said.

"With the rise in imports boding well for domestic demand, the Bank of Canada remains on track to taper its asset purchases again this month," Stephen Brown, senior Canada economist with Capital Economics, said in a note.

Canada's central bank will update its forecasts in its regular interest rate decision on July 14.

The Canadian dollar was up 0.5% at 1.2379 to the U.S. dollar, or 80.78 U.S. cents, on Friday.

($1 = 1.2410 Canadian dollars)

(Reporting by Julie Gordon in Ottawa, additional reporting by Fergal Smith in Toronto; Editing by Andrew Heavens and Paul Simao)

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