Canada's May Trade Surplus Widens

Canada's trade surplus widened more than expected in May as exports to countries other than the U.S. reached a record.

The surplus widened to C$5.54 billion ($5.43 billion) from a revised C$4.76 billion in April, Statistics Canada said today in Ottawa. Exports of energy products soared 8.1 percent as Japan and South Korea bought more coal to make steel. Overall, exports gained 5.4 percent while imports rose 3.9 percent.

Today's report indicates exporters are coping with a high currency and weak U.S. demand better than the central bank anticipated, giving policy makers more reason to leave interest rates unchanged next week as inflation threatens to quicken. The Bank of Canada has said trade will cut economic growth by 2.4 percentage points this year, limiting expansion to the slowest since 1992. Policy makers release an updated forecast July 17.

The Bank of Canada unexpectedly kept borrowing costs unchanged last month after cutting interest rates four times since December, saying rates are ``appropriately accommodative'' because inflation may accelerate past 3 percent.

Economists surveyed by Bloomberg said the trade surplus would widen to C$5.3 billion from an initially reported C$5.1 billion in April, according to the median of 20 forecasts.

Imports had the biggest 1-month gain since July 2007, increasing to C$36.6 billion in May, Statistics Canada said. Exports rose for a fifth straight month to C$42.1 billion, as Canada sent a record C$10.8 billion worth of goods to countries other than the U.S. Exports of automotive products fell 3.5 percent, the third straight monthly decline.

Measured by volume, exports gained 3.2 percent and imports rose 4.3 percent, the agency said.

Canada, Bloomberg
7/11/2008 6:47:57 AM