Trade deficit widens to $1.1B

Canadian exports fell 2.5 per cent in June, led by a drop in industrial goods and materials, while imports decreased 1.2 per cent because of a significant decline in energy products.

Consequently, Canada's trade deficit with the world widened to $1.1 billion in June from $695 million in May.

Exports declined to $33.5 billion from $34.4 billion, Statistics Canada reported Wednesday. Prices contracted by 1.2 per cent and volumes decreased by 1.3 per cent.

After a solid gain in May, imports declined to $34.6 billion in June from $35 billion. Lower imports of energy products were instrumental to the decrease.

"The drop in exports and imports in June adds to a recent list of softer-than-expected data in Canada, but is hardly a crushing blow to the outlook as a stand-alone result," BMO economist Doug Porter said in a note.

Industrial goods and materials accounted for two-thirds of the decline in the value of overall exports, followed by energy products and automotive products.

Again in exports of machinery and equipment mitigated the decrease. Excluding energy products, imports grew 0.9 per cent.

Import prices fell 1.2 per cent while volumes remained unchanged, following four straight monthly increases.

Exports to the United States decreased one per cent, reflecting the weakness in exports of energy products, while imports rose 0.8 per cent. As a result, Canada's trade surplus with the United States narrowed to $3 billion in June from $3.4 billion in May.

Exports to countries other than the United States fell seven per cent, largely a result of declining exports to the European Union.

The fall in exports outpaced a 4.6 per cent decrease in imports.

Consequently, Canada's trade deficit with countries other than the United States rose to $4.2 billion in June from $4.1 billion in May.

In a separate announcement, U.S. data revealed Wednesday thatAmerica's trade deficit with the world rose a stunning 19 per cent in June, to $49.9 billion US. That's the highest level in 21 months.

Imports increased as exports slowed, causing the overall deficit.