Canada's goods trade balance swung to a C$0.684 billion surplus in July from a revised deficit of C$0.179 billion in June (previously reported at a surplus of C$0.638 billion). Forecasters in an Econoday survey looked for a surplus of C$0.9 billion for July. Statistics Canada said the changed June figures were within the usual range of revision.

Imports dropped by 1.7 percent on the month and were up by 4.4 percent on the year. Exports slipped 0.4 percent on the month while rising 6.9 percent on the year. In real or volume terms, imports fell 2.0 percent in July on the month and exports were down 1.5 percent on the month in real terms.

Looking at the monthly changes for imports and exports, both saw declines in six of 11 product groups on a nominal basis. Interestingly, the big mover for both imports and exports was motor vehicles and parts. Excluding that category, imports rose 0.5 percent, and exports rose 0.3 percent.

Imports of motor vehicles and parts fell 10.8 percent on the month, mostly reflecting a big bounce in June from delayed deliveries from U.S. factories in May. On the export side, motor vehicles and parts declined 5.4 percent in July, a second consecutive monthly decrease.

Canada's trade surplus with the United States widened from $9.0 billion in June to $11.3 billion in July, the largest surplus since October 2023. Canada's deficit with countries other than the US widened from $9.2 billion in June to $10.6 billion in July.

July's trade balance is seen in surplus of C$0.9 billion versus June's surplus of C$0.6 billion and May's deficit of C$1.6 billion.

The merchandise trade balance measures the difference between imports and exports of goods. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade and can offer a guide to an economy's competitiveness. Nominal data are supplied with regards to principal trading partners and product classification.

Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect currency values in foreign exchange markets. This is particularly true for Canada which relies on exports and particularly those to the U.S. for growth. It should be noted that this report focuses solely on goods trade - it leaves services trade for the quarterly national accounts and balance of payments reports.

Imports indicate demand for foreign goods while exports show the demand for Canadian goods in the U.S. and elsewhere. The Canadian dollar is particularly sensitive to changes in its trade balance with the U.S. For the most part, Canada's trade balance is in surplus thanks to its exports to the U.S. Both the nominal export and import values are split into volume (real) and price components. This permits trade data to be analyzed for both changes in trade patterns as well as changing prices. This has been particularly important of late given energy price volatility and the impact on Canada's merchandise shipments. A word of caution -- the data are subject to large monthly revisions. Therefore, it can be misleading to form opinions on the basis of one month's data.

The bond market is sensitive to the risk of importing inflation. This report gives a breakdown of trade with major countries so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country.