Morning Market Brief: Wednesday, August 9, 2023

Canada’s trade deficit widens?

The latest trade data from Statistics Canada indicates that falling exports contributed to a second consecutive monthly trade deficit in June. The trade imbalance has raised concerns about the potential impact on Canada’s economic growth in the second quarter of 2023. Conversely, exports contributed to growth in the first quarter of 2023. Here are some key takeaways from the report:?

• Canada’s trade deficit expanded to $3.73 billion in June, a significant increase from May’s $2.68 billion deficit. This marked the largest trade deficit since October 2020. Economists estimated a $2.79 billion deficit for June.
• Exports, a critical driver of economic growth, declined by 2.2% to $60.7 billion in June, month-on-month, representing the lowest exports since the beginning of 2022. The drop was attributed to decreased exports of metals and industrial machinery.
• Imports also declined, falling by 0.5% in June. The decrease in imports was primarily due to a decline in purchases of energy products.
• Experts suggest that weakening exports might negatively impact Canada’s second-quarter economic growth, which could depend more heavily on domestic demand for support.
• However, consumer spending resilience “appears to be slowly cracking under the pressure of higher interest rates,” as highlighted by CIBC economist Andrew Grantham.

Canada’s balance of trade figures for July will be released in September, and Statistics Canada expects the data to be impacted by the port strike in British Columbia and flooding in Nova Scotia. While these unpredictable occurrences might introduce short-term fluctuations, these events also underscore the importance of adopting a long-term investment perspective. Insights gained through tracking earnings, examining interest-rate trends and understanding the interplay between economic indicators will leave you well-equipped to navigate through varying economic scenarios.

At?CIBC Private Wealth, we aim to take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail, please get in touch with your advisor any time.