Canada’s merchandise trade balance moved sharply into surplus territory in June after three months in deficit. June’s surplus registered at $638 million, with last month’s deficit being revised slightly lower to $1.6 billion.
Merchandise exports increased by a hefty 5.5% in June, pulling the value of goods exported to the highest level since January 2023. Increases were broad-based, with shipments up in 9 of 11 sectors. Leading the charge was a 13.3% month-on-month (m/m) increase in crude oil shipments helped by the recently completed Trans Mountain pipeline. Exports of metal and non-metallic products also advanced at a healthy 11.8% m/m pace.
Merchandise imports also increase in June, but by a smaller amount (1.9% m/m). Gains were also broad based as 9 of 11 sectors posted increases, with outsized contributions from a 5.1% m/m increase in passenger cars and light truck imports. Elsewhere, consumer goods imports rose by 3.7% m/m and imports of pharmaceutical goods advanced by 16.9%.
In volume terms, merchandise exports and imports rose by 4.57% and 1.16% m/m, respectively.
Canada’s merchandise trade surplus with the United States widened for a third straight month, up to $9.4 billion in June from $8.8 billion the month prior.
Key Implications
Despite robust export activity in June, trade will likely act as a headwind to second quarter GDP growth, as April and May data came in on the weaker end. That being said, the hand-off into next quarter could prove to be significant. The effects of the Trans Mountain pipeline expansion are now flowing through the data, with strong crude oil exports expected in the coming months.
In the Bank of Canada’s recently released Monetary Policy Report (MPR), they expect GDP in the third quarter to grow by a sizeable 2.8%, higher than most forecasters expect. While we still have minimal data on how the entire economy is tracking, Q3 trade could add up to 1.0 percentage points (ppts) to headline GDP growth.
