Canadian trade with the rest of the world continued its recovery to more normal levels as the global economy rebounded from Covid-19 lockdowns.

Merchandise exports rose 11.1 per cent in July, adding to a 20.5 per cent gain in June, Statistics Canada said Thursday in Ottawa. Imports increased 12.7 per cent in July, after gaining 20.3 per cent in June. Combined, exports and imports have increased 35% since falling to a decade-low in April, leaving them five per cent shy of pre-pandemic levels.

The figures will bolster confidence in Canada’s rebound, though economists caution a full recovery is far from assured. While global trade has been robust in some sectors like autos, other industries are still languishing, including travel.

“July’s trade data joins other indicators in confirming that Canada’s recovery has remained intact,” Omar Abdelrahman, an economist at Toronto-Dominion Bank, said in a report. “However, notable headwinds mean that the road forward for both is mired with uncertainty. For one, growth in services trade, as evidenced by today’s report, is expected to remain restrained.”

Fragile Services

Service exports are still down 23 per cent from pre-pandemic levels, compared with six per cent for merchandise exports. On the imports side, services are still 33 per cent lower than February levels, versus 4.1 per cent for goods.

The quicker rebound in imports caused the country’s merchandise trade deficit to widen to $2.45 billion (US$1.87 billion) in July, from a revised $1.59 billion in June. Economists had expected a deficit of $2.5 billion.

Motor vehicle exports have already surpassed pre-pandemic levels, as have shipments of consumer goods, which could foreshadow an upcoming dip.

“There is a risk of a significant slowdown in exports in August–September, given that the volume of auto exports is now 10 per cent above the pre-pandemic February level,” Nikita Perevalov, an economist at Scotiabank, said in a report.

--With assistance from Erik Hertzberg.