Canada's trade deficit with the rest of the world reached its highest level in almost three years in June, as both exports and imports saw a decline compared to the previous month.

According to Statistics Canada, the country recorded a merchandise-trade deficit of 3.73 billion Canadian dollars (CAD), equivalent to approximately $2.79 billion. This figure exceeded the consensus forecast of a CAD 2.7 billion deficit from economists at National Bank Financial. The last time the trade deficit reached this level was in October 2020.

The revised data for May shows a narrower shortfall of CAD 2.68 billion, which is an improvement compared to the original estimate of CAD 3.44 billion.

In June, merchandise exports dropped by 2.2% to CAD 60.70 billion, while imports saw a decline of 0.5% to CAD 64.43 billion. When adjusted for volume or price, exports experienced a decrease of 1.1%, whereas imports rose by 0.9%.

The decline in exports was mainly driven by reduced shipments of metallic and non-metallic mineral products. On the other hand, imports fell after a 3.0% increase in May, primarily due to lower purchases of energy products and consumer goods, specifically pharmaceutical products.

During the second quarter, exports in volume terms dropped by 0.4% on a non-annualized basis, while imports increased by 0.9%. CIBC Capital Markets highlights that these figures suggest net trade acted as a drag on growth during this three-month period.

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