(Adds analysts' comments on implications for growth and the
Bank of Canada)
By Randall Palmer
OTTAWA, July 3 A resurgence in Canadian exports
after they were hampered by plant maintenance helped cut the
country's trade gap to C$152 million ($143 million) in May from
C$961 million in April, despite record imports, Statistics
Canada said on Thursday.
Exports rose by 3.5 percent to the second highest level ever
at a seasonally adjusted C$44.17 billion, exceeded only in July
2008, with volumes up 4.2 percent. Analysts, however, were
divided on the impact of the trade upturn on Canada's
still-tepid economic growth.
"Unfortunately, that rebound was heavily influenced by
certain one-off factors and is therefore unlikely to convince
the Bank of Canada that its long-awaited export revival is at
hand," said David Madani, Canada economist at Capital Economics.
Bank of Montreal senior economist Benjamin Reitzes offered a
brighter view: "While trade may not add much to growth in (the
second quarter), the improving trend in exports bodes well for
the rest of 2014."
Imports rose at 1.6 percent, less than half the pace of
export growth, but at C$44.32 billion they nonetheless topped
April's record C$43.62 billion.
The trade balance ran four months of deficit from October
2013, then returned to surplus in February and March before
tipping back into deficit in April, largely because maintenance
slowed production at refineries and car plants.
Exports of vehicles and parts rose 9.8 percent to C$6.62
billion in May, while exports of refined oil products bounced
back by C$505 million to C$1.12 billion after having dropped by
C$452 million in April. Exports to the United States were the
second highest on record.
Higher imports were also led by vehicles and parts, which
rose by 6.7 percent to C$7.80 billion, whereas imports of energy
products dropped 3.6 percent. Imports from countries other than
the United States increased 5.1 percent to a record C$15.61
TD Securities senior Canada macro strategist Mazen Issa said
net exports had been expected to provide somewhat of a net drag
on growth but now might have only a negligible effect.
"Though this is just one print, this may be the beginnings
of the rotation in the drivers of growth that has long been
sought," he said, alluding to the central bank's hope that
exports and business investment would take over from indebted
consumers and government in leading the economy.
Second quarter growth is still likely to come in softer than
the 2.5 percent annualized rate the Bank of Canada forecast in
its April Monetary Policy Report, and bank Governor Stephen
Poloz will still likely emphasize this in trying to talk down a
recent acceleration in inflation, Issa said.
(Editing by Chizu Nomiyama; and Peter Galloway)