Statistics Canada says trade deficit narrowed as both exports and imports fell

OTTAWA — Canada's merchandise trade deficit narrowed to $2.4 billion in August as both exports and imports edged lower following double-digit percentage gains in June and July.

"The recovery in trade came to halt in August, with a small dent what was looking like a v-shaped rebound," said Benjamin Reitzes, director, Canadian rates and macro strategist at BMO Capital Markets.

"Similar to most other economic data points, expect a slower rebound from here on in after the initial sharp improvement off the COVID-lockdown lows."

Statistics Canada said Tuesday the result came after a deficit of $2.5 billion in July.

Economists on average had expected a deficit of $2 billion for August, according to financial data firm Refinitiv.

Total imports fell 1.2 per cent in August to $47.4 billion due to a 25.5 per cent drop in imports of aircraft and other transportation equipment and parts.

Imports of metal and non-metallic mineral products also fell 5.7 per cent, while imports of industrial machinery, equipment and parts dropped 4.4 per cent after rising for three consecutive months.

Meanwhile, exports fell 1.0 per cent to $44.9 billion as exports of motor vehicles and parts fell 6.8 per cent in August.

Statistics Canada said the decline in motor vehicle and parts in August came after an unusual rise for the sector in July due to higher production and shorter temporary seasonal stoppages. It added that exports of passenger cars and light trucks were higher than February levels.

"Stripping away monthly noise, the release is consistent with our view that as the economy enters the recuperation' stage, activity will moderate," TD Bank economist Omar Abdelrahman wrote in a report.

"The reversal in export gains speaks to the still-highly-uncertain backdrop surrounding exports and business investment."

In volume terms, imports were down 0.5 per cent in August, while export volumes were down 1.4 per cent.

Compared with February, before the pandemic brought the economy to a halt, imports were down 5.1 per cent and exports were down 7.0 per cent.

This report by The Canadian Press was first published Oct. 6, 2020