* 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
By David Ljunggren
OTTAWA, Sept 4 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
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
"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.
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
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.