Canada's trade surplus narrows to $778M in July as imports outpaced exports

Statistics Canada says the country's merchandise trade surplus fell to $778 million in July as imports rose more than exports for the month.

The result compared with a revised trade surplus of $2.6 billion for June compared with the initial reading of a $3.2 billion surplus.

The July surplus came as total imports rose 4.2 per cent to reach a record high of $53.0 billion. Statistics Canada says motor vehicles and parts climbed 21.1 per cent and accounted for more than two-thirds of the overall increase.

Meanwhile, total exports rose 0.6 per cent in July to $53.7 billion, another record high, as gains in a number of different sectors were partially offset by a sharp drop in lumber exports.

Excluding exports of lumber and other sawmill products, total exports rose 2.0 per cent.

In volume terms, total imports rose 1.9 per cent in July, while exports fell 0.3 per cent.

Economists weren't anticipating the import surge to narrow the gap by what it did. 

"Add today's international trade report to the list of recent negative economic surprises suggesting that the Canadian economy hit a soft patch in the beginning of the third quarter," TD Bank economist Omar Abdelrahman said.