Interesting results this morning, since both Canada and the U.S. revealed their July merchandise trade. Interseting because both numbers were positive, Both Canada and the U.S. saw a marked improvement of their trade balance.
For Canada its June trade balance of -$1.2 billion was reduced to -$0.7 billion for July, the result of exports rising by 2.2% (while imports only rose by 0.5%). Looking into the numbers Canada’s trade performance is even better since volume rose by 4.1% - a 1.9% price decline reduced the upside numbers. As for imports it was the opposite trend with price rises (0.9%), and volume was down 0.4%. The Japan effect is now gone (trade is back to its pre March level), trade direction reverse towards the U.S. again. Funny enough energy exports keep on falling (they were not part of the increase here) partly due to the forest fires here (thing of those as the equivalent of Hurricane in the Golf of Mexico) that halted production (also prices were slightly lower in July) that trend too has reversed.
U.S. numbers were also very interesting
Exports increased and imports decreased. Exports are well above the pre-recession peak and up 15% compared to July 2010; imports are up about 13% compared to July 2010. The decline in the trade deficit was due to an increase in exports. Now America has benefited from a weak currency (although this has come to an end (15% down in the past 12 months), so the future direction of its deficit (especially as exporters will be challenged) is hard to predict, especially if Europe is in real trouble now, it is hard to see how this trend can persist. However, the likes of GS preach this trade performance to suggest that GDP growth in Q3/11 will be stronger in the U.S. (around 1.6%).
(Source: Calculated Risk)
Intersting time for both economies. Big difference is that trade accounts for about 1/3 of Canada's GDP while the figure for the U.S. is around 10%.