Hot sectors in a tepid recovery
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UPDATE 2-Weaker Canada July trade data to cut into growth
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OTTAWA, Sept 11 (Reuters) - Canada's trade surplus narrowed more than expected in July to C$4.85 billion ($4.51 billion), Statistics Canada said on Thursday, helping set the stage for weak economic growth numbers.
Imports grew twice as fast as exports, and energy exports fell for the first time in nine months.
Analysts had on average forecast a surplus of C$5.60 billion. Statscan revised down the June surplus to C$5.64 billion from C$5.76 billion.
"This is further confirmation that trade continues to drag heavily on GDP (gross domestic product) growth," BMO Capital Markets deputy chief economist Doug Porter commented.
However, analysts said it was encouraging that imports and exports had risen in real and nominal terms. Exports and imports advanced to record highs.
"Despite the decline in the headline surplus the number set reflects a considerable pickup in cross-border activity which tends to pander to a positive outlook on the manufacturing shipments report," HSBC Securities economist Stewart Hall said in a note to clients.
"Looking ahead, today's trade data suggests that there is room to crowd in some optimism."
An 8 percent jump in imports from the United States caused Canada's trade surplus with its neighbor to narrow and its deficit with non-U.S. countries also narrowed.
Exports grew 2.2 percent, with a 1.7 percent rise in volume, but energy exports fell 1.5 percent, the first decline since October 2007. Strong sales of industrial goods and materials and machinery and equipment boosted exports.
Imports jumped 4.6 percent, including a 3.6 percent rise in volume. They rose in all sectors, led by cars, industrial goods and materials and machinery and equipment.
Scotia Capital economists Derek Holt and Karen Cordes said the $30/barrel fall in oil prices since mid-July pointed to further softening of the trade surplus in the months ahead.
Porter said BMO is looking for a similar drag on GDP from net exports in the third quarter as in the second and is expecting annualized economic growth of about 0.8 percent. (Additional reporting by Louise Egan; Editing by Scott Anderson)
