Data due this week will probably show Canada’s merchandise trade balance swung back into deficit, as export strength is tested by the auto sector and energy bottlenecks.
Economists in a Bloomberg survey expect a C$300 million ($228 million) deficit for June on Friday, after a surprise surplus a month earlier. Gross domestic product figures for May, due in a separate release Wednesday from Statistics Canada, are expected to show a monthly expansion of just 0.1%.
The trade numbers will highlight how Canada’s exporters are faring amid global uncertainty, as tariffs imposed by U.S. President Donald Trump continue to hamper business investment globally. Canada posted an unexpected trade surplus in May as non-energy export volumes jumped over 4.4%, the most since 2015, driven primarily by motor vehicles, a notoriously volatile sector.
“Export strength was broad-based in May, with real exports higher in 10 of 13 categories reported by Statistics Canada,” said Robert Both, a macro-strategist at Toronto-Dominion Bank. However, “with further gains in energy products unlikely due to curtailment and transportation bottlenecks, we look for a giveback in non-energy exports to drive a decline in export volumes for June,” he said.
Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, told investors last week that “a promising start to the second quarter will be dented by May’s flat GDP growth figure.” That means he’ll need to see how third-quarter indicators play out before deciding whether to move forward his call for a Bank of Canada rate cut in the first half of next year.
Both and his colleagues at Toronto-Dominion are expecting GDP growth of 0.2% to mask “a sharp divergence between goods and services; goods output will benefit from a rebound in manufacturing while an outsized drop in wholesale trade will weigh on services.” Accordingly, second-quarter growth of slightly lower than 3% will keep the central bank “on the sidelines as it awaits more clarity.”
