Canada's trade gap narrowed dramatically in June, to its smallest in 17 months, as the country's exports surged to record levels even as protectionist trade clouds gathered.
Analysts had expected a trade deficit of $2.3 billion, according to a poll by Thomson Reuters Eikon.
The median estimate of economists surveyed by Bloomberg called for a June trade deficit of $46.5 billion.
On a volume basis, exports were up 2.1 per cent while imports were down 1.2 per cent.
As a result, the trade surplus with the United States grew to C$4.12 billion in June from C$3.33 billion in May.
There were increases during the month of exports of crude oil, heavy fuel oils, diesel fuel, metal ores and non-metallic minerals, motor vehicles and parts, as well as industrial machinery, equipment and parts. Last month, the Trump administration began following through with a March threat of tariffs on tens of billions of dollars of imported Chinese goods, prompting China to respond with retaliatory levies on high-value US exports such as soybeans.
"But the first indications for the month suggest that there could be some growth left to come in the second quarter, upgrading the odds of a likely Bank of Canada rate hike in the coming months".
A dip in auto exports and rising oil prices in June drove the increase in the gap between U.S. imports and exports, the Commerce Department reported Friday. It was the first time exports surpassed the Can$50 billion mark.
The latest numbers add to the case for the Bank of Canada to raise rates again in the near-term, Nye said, adding that he expects the central bank to continue its gradual approach to increasing the interest rates. That reflected a jump in shipments overseas of soybeans, up 40 percent in the first half of the year compared with 2017, and petroleum and related products.
"Much of the rise in exports was driven by Chinese imports of soybeans, which we believe reflects a reaction to potential imposition of tariffs", Barclays said last week in response to the GDP number. "Nominal exports jumped 4.1%, while imports edged down 0.2%". Energy exports were up 7.1 per cent month over month, while energy imports were down 15.1 per cent.