Canada's trade surplus hits record

Canada's trade surplus surged to a record C$8.63 billion ($6.49 billion) in June, far beyond market expectations, on a jump in exports and a dip in imports, Statistics Canada said on Friday.
Analysts had forecast, on average, a surplus of C$5.7 billion for June. Statscan raised May's surplus to C$5.8 billion from the preliminary C$5.2 billion. The last record trade surplus was set in January 2001 at C$8.602 billion.
"Increasing global demand and a steady rebound for the first half of 2004 south of the border appear to be eroding any dampening effects that the strong Canadian dollar had over the exporting community," Statscan said.
The Canadian dollar jumped nearly half a cent to C$1.3235 against the US dollar, or 75.55 US cents, from C$1.3312, or 75.12 US cents, after the domestic trade data and a simultaneous report out of Washington showing a record US trade deficit of $55.82 billion in June.
The combined trade results, along with much stronger than expected Canadian factory shipments data, led analysts to believe the Bank of Canada is more likely to hike interest rates at its upcoming September 8 rate announcement.
"As for the Bank of Canada, this puts a tightening in September back on the table - although we concede that it still remains highly dependent on the next round of US data, and the next payrolls report in particular," said Marc Levesque, chief strategist, at TD Securities.
Canadian exports increased 4.4 percent, the fifth consecutive monthly rise, to C$39.04 billion from May's C$37.39 billion which Statscan raised from the preliminary C$36.79 billion. Gains were posted across the board except for forestry products, Statscan said.
Imports declined 3.7 percent to C$30.42 billion from May's C$31.60 billion, which was raised from a preliminary C$31.57 billion. A 10.2 percent drop in machinery and equipment imports was partly behind the fall, the statistical agency said.
Canadian factory shipments rose 1.5 percent in June from May, more than triple the average market forecast, to C$49.92 billion, with the gains spread across a broad swath of industries, Statscan said.
Analysts had expected, on average, a gain of 0.4 percent from May. Statscan lowered May's rise to 1.0 percent from a preliminary 1.1 percent.