UPDATE 2-Canada July trade deficit jumps as imports climb, exports fall
* Canada exports drop 0.6 percent; imports up 0.6 percent
* Canada posts 19th consecutive trade deficit
* Trade surplus with United States drops to C$3.17 billion
OTTAWA, Sept 4 (Reuters) - Canada's trade deficit more than doubled to C$931 million ($887 million) in July, reflecting deep-seated exporter challenges such as uncertain foreign markets and a strong Canadian dollar.
The deficit, the 19th in a row, was far greater than the C$350 million shortfall forecast by analysts. Statistics Canada, which issued the data on Wednesday, revised June's deficit to C$460 million from an initial C$469 million.
Trade is a primary driver of the domestic economy, and the Bank of Canada says the export sector's problems are holding growth back. Exports dropped by 15.9 percent to the European Union alone in July from June.
Overall imports grew by 0.6 percent on higher shipments of metal ores and basic and industrial, chemical, plastic and rubber products. Exports fell by 0.6 percent on lower shipments of aircraft as well as unwrought precious metals and their alloys.
"There's no question about this being a disappointing month," said Peter Hall, chief economist at Export Development Canada.
Hall told Reuters the figures were not quite as gloomy as they seemed at first glance, since aircraft shipments tend to be a volatile indicator and the value of precious metals exports had been hit by falling gold prices.
The Canadian dollar lost some of its gains after the figures were released, dropping to C$1.0506 to the U.S. dollar, or 95.18 U.S. cents. This was still firmer than Tuesday's North American finish at C$1.0530, or 94.97 U.S. cents.
Export volumes dropped by 1.7 percent, which David Madani, Canadian economist at Capital Economics, said added to concerns that Canada was not fully benefiting from a gradually improving U.S. economy.
"With export competitiveness challenges likely to persist, the Bank of Canada's export-led recovery could face significant delays," he said in a note to clients.
Exports to the United States, which comprised 75.1 percent of all Canadian exports in July, grew by 0.8 percent to C$29.45 billion but are still well below the all-time high of C$34.24 billion in July 2008.
July imports from the United States advanced by 2.7 percent to hit a record CS26.27 billion. As a result, the trade surplus with the United States shrank to C$3.17 billion from C$3.62 billion in June.
"A deceleration in U.S. growth heading into the third quarter will prevent a more dramatic and sustained move higher in Canadian exports," TD Securities strategist David Tulk said in a note to clients.
The cumulative trade deficit for the first seven months of the year was C$5.67 billion, the second highest January-July shortfall on record after the C$7.63 billion posted in 2012.