By Ketki Saxena
Investing.com - In June, Canada's merchandise exports increased 2.0%, mostly on crude oil and gold exports, while imports rose 1.7%, mainly on energy products, Statistics Canada reported today, widening the trade surplus from $4.8 billion in May to $5.0 billion in June.to$5-billion in June, the largest since 2008.
Total exports rose 2.0% in June to $69.9 billion, with 8 of 11 product sections posting increases, marking the sixth consecutive monthly increase for Canadian exports.
Total imports rose 1.7% in June to $64.9 billion, a fifth consecutive monthly gain, driven by increases in the imports of energy products. Imports of aircraft and other transportation equipment also increased, while lower imports of motor vehicles and parts (-6.8%) partially offset the increase in total imports.
Crude Oil, Gold Primary Driver of Increasing Exports
In terms of exports, the greatest increase was energy, largely due to rising crude oil and bitumen shipments to the United States.
Exports of metals and consumer goods also showed notable increases, as a result of rising gold shipments to the United Kingdom and higher pharmaceutical exports to the U.S., Australia and the Netherlands related to COVID-19 medications.
A decrease in exports of forestry products and building and packaging materials partly offset those gains, largely attributable to a decrease in the value of lumber exports mainly on lower prices due to decreased demand from the construction industry in the United States, where housing starts in May posted their most severe decline in over two years.
Implications for the Canadian Economy
The widening of the trade surplus - when export volumes and revenue increase at a greater pace than imports - is considered a positive sign for the Canadian economy, as it rakes in the profits from export of its key commodities and industrial output.
However, Stephen Brown, senior Canada economist with Capital Economics, cautioned that trade surpluses will likely narrow going forward.
“Export volumes outpaced import volumes in June but, with the survey-based export indices falling back, the outlook is growing more challenging,” Mr. Brown wrote in a note to clients. “Together with the declines in commodity prices since June, it seems likely that the trade surplus will narrow over the summer."