(Bloomberg) --
Canada's trade deficit widened more than expected as energy shipments abroad declined for a second month, a sign recent export strength could be fading.
The nation's merchandise trade gap hit C$1.12 billion ($840,000 million) in July, Statistics Canada said Wednesday from Ottawa. Economists surveyed by Bloomberg were expecting a deficit of C$350 million.
Exports fell 0.9%, led lower by a 6.7% decline in energy shipments. Crude oil exports pulled back 7.7%. And stripping away price effects, exports edged down 0.1% on the month.
While economic growth in Canada led the Group of Seven in the second quarter, the expansion was driven primarily by a rebound in oil exports after a half year of dismal growth. Rising global uncertainty amid the escalating trade war between the U.S. and China threatens the northern nation's export prospects, a topic likely to be addressed by the Bank of Canada at its rate decision later Wednesday morning.
Canada's trade surplus with the U.S., its largest trading partner, narrowed to C$4.6 billion in July, as exports declined 1.1%. Exports to China fell 15.5% amid a lingering diplomatic dispute stemming from Canada's arrest of a top Huawei Technologies Co. Ltd. executive on an American extradition request.
On the import side, puchases from abroad rose 1.2%, led by consumer goods. Volumes were up by 2.3% -- the largest increase since last March. While that underlying strength in imports has the potential to drag on gross domestic product in the third quarter, it could also be a sign of firming domestic demand.
June's trade balance was revised to a deficit C$55 million, after an initially reported surplus of C$136 million, the statistics agency said.
To contact the reporter on this story: Erik Hertzberg in Ottawa at eschmitzhert@bloomberg.net
To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Stephen Wicary
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