| OTTAWA, Sept 2
OTTAWA, Sept 2 Canada's trade deficit in July
unexpectedly shrank on stronger non-energy exports, a sector the
Bank of Canada says is crucial to helping revive an economy hit
by low oil prices.
Statistics Canada said on Friday that the July deficit was
C$2.49 billion ($1.90 billion), lower than the C$3.25 billion
shortfall predicted by analysts in a Reuters poll and below the
record C$3.97 billion in June.
Exports jumped by 3.4 percent, the biggest month-on-month
gain since last December, on healthy gains in the motor vehicles
and parts, metal and non-metallic mineral products and
transportation equipment sectors. Volumes rose by 3.7 percent
while prices fell by 0.3 percent.
Non-energy exports have been spluttering for several months,
prompting concern at the Bank of Canada, which cut interest
rates twice last year to offset the effects of the oil slump.
The central bank has long been looking for non-resource exports,
helped by the soft currency and improving U.S. demand, to offset
the commodity price drag.
"The most important thing here is that exports finally
snapped their lengthy slump in a meaningful way," said Doug
Porter, chief economist at BMO Capital Markets.
"This is definitely a breath of fresh air for Canadian
The Canadian dollar strengthened on the data,
rising to C$1.3019 to the U.S. dollar, or 76.81 U.S. cents, up
from C$1.3091, or 76.39 U.S. cents before the release.
The Bank of Canada has a rate announcement scheduled for
Wednesday. A Reuters poll showed markets see the central bank on
hold until 2018.
Imports slipped by 0.1 percent on lower demand for consumer
goods, vehicles and parts and electronic and electrical
equipment and parts.
Exports to the United States, which took 76.2 percent of all
Canadian exports in July, rose by 3.3 percent while imports fell
by 0.5 percent. As a result, Canada's trade surplus with the
United States rose to C$2.62 billion from C$1.43 billion in
"Domestic demand in the United States is still strong ...
and that's translating into growth for Canadian exports," said
Ross Prusakowski, a senior economist at Export Development
In additional to low oil prices, the economy also has to
recover from a major fire in northern Alberta in May.
Statscan, citing the after-effects of the inferno, said
separately that the labor productivity of Canadian businesses in
the second quarter of 2016 fell by 0.3 percent, the first drop
in a year.
(Additional reporting by Fergal Smith in Toronto; Editing by