Canada swings to July trade surplus as imports and exports fall

By Fergal Smith

TORONTO (Reuters) -Canada posted a lower-than-expected trade surplus of C$684 million ($505 million) in July as imports fell faster than exports, while the June balance was revised to a deficit from a surplus, Statistics Canada data showed on Wednesday.

Exports were down by 0.4%, after rising 4.7% in June, on declines for motor vehicles and parts as well as wheat and canola. In volume terms, exports decreased 1.5%.

"Export volumes were pretty weak across the board," said Stuart Bergman, chief economist at Export Development Canada.

"That continues the volatile yo-yo trend that we've seen this year ... This bouncing around makes it really hard for businesses to plan. It is somewhat reflective of the stop-start nature of what we're seeing in the economy south of the border."

Canada sends about 75% of its exports to the United States.

Analysts polled by Reuters had forecast a surplus of C$0.8 billion. June's trade balance was revised to show a deficit of C$179 million from a preliminary surplus of C$638 million.

Imports fell by 1.7%, from a record C$66.1 billion in June, on lower motor vehicles and parts as well as aircraft. Import volumes were down 2%.

"Higher interest rates and prices continue to hamper consumers," Bergman said.

The Bank of Canada has begun lowering interest rates to support the economy. It is due to make a policy decision at 9:45 a.m. ET (1345 GMT).

The Canadian dollar was trading nearly unchanged at 1.3552 per U.S. dollar, or 73.79 U.S. cents.

($1=$1.3552 Canadian)

(Reporting by Fergal Smith; Editing by Mark Porter and Sharon Singleton)