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Canada current account swings to surplus in Q1 for first time since 2008

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Canada‘s current account balance in the first quarter swung to a surplus for the first time since 2008, boosted this year mainly by exports of oil and lumber, data showed on Monday.

Canada posted a C$1.18 billion ($977.47 million) surplus in the first quarter compared with a revised C$5.27 billion deficit in the fourth quarter of 2020, Statistics Canada said.

The largest contributors were energy products (up C$6.8 billion) and forestry products and building and packaging materials (up C$1.4 billion), mostly on higher prices, Statscan said.

Economists said the swing to a current account surplus, reflecting greater demand for the commodities and other goods that Canada produces, has been supportive of the Canadian dollar.

The currency has climbed more than 5% since the start of the year, the strongest performance among Group of 10 currencies. On Monday, the Canadian dollar was trading 0.2% lower at 1.2087 to the greenback, or 82.73 U.S. cents.

“The overall current account surplus likely helped support the Canadian dollar during the first quarter,” Royce Mendes, a senior economist at CIBC Capital Markets, said in an emailed note.

“But, as Canadians begin traveling outside the country again, it could sink back into deficit territory before the year is over,” he added.

In a separate report, Statscan said producer prices in Canada rose by 1.6% in April from March, mainly on higher prices for lumber and other wood products.

Softwood lumber prices gained 169.4% from a year earlier, the largest annual increase in the history of the index.

“Persistent demand for softwood lumber in the United States and Canada for construction and residential renovations, combined with lower supply, drove this category upward,” Statscan said.

Producer prices gained 14.3% on the year in April, the biggest rise since 1980, led by a 78.4% increase in prices for energy and petroleum products.

 

(Reporting by Steve Scherer, additional reporting by Fergal Smith in Toronto; Editing by David Gregorio)

Economy

Canadian retail sales slide in April, May as COVID-19 shutdown bites

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Canadian retail sales plunged in April and May, as shops and other businesses were shuttered amid a third wave of COVID-19 infections, Statistics Canada data showed on Wednesday.

Retail trade fell 5.7% in April, the sharpest decline in a year, missing analyst forecasts of a 5.0% drop. In a preliminary estimate, Statscan said May retail sales likely fell by 3.2% as store closures dragged on.

“April showers brought no May flowers for Canadian retailers this year,” Royce Mendes, senior economist at CIBC Capital Markets, said in a note.

Statscan said that 5.0% of retailers were closed at some point in April. The average length of the closure was one day, it said, citing respondent feedback.

Sales decreased in nine of the 11 subsectors, while core sales, which exclude gasoline stations and motor vehicles, were down 7.6% in April.

Clothing and accessory store sales fell 28.6%, with sales at building material and garden equipment stores falling for the first time in nine months, by 10.4%.

“These results continue to suggest that the Bank of Canada is too optimistic on the growth outlook for the second quarter, even if there is a solid rebound occurring now in June,” Mendes said.

The central bank said in April that it expects Canada’s economy to grow 6.5% in 2021 and signaled interest rates could begin to rise in the second half of 2022.

The Canadian dollar held on to earlier gains after the data, trading up 0.3% at 1.2271 to the greenback, or 81.49 U.S. cents.

(Reporting by Julie Gordon in Ottawa, additional reporting by Fergal Smith in Toronto, editing by Alexander Smith)

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Economy

Canadian dollar notches a 6-day high

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The Canadian dollar strengthened for a third day against its U.S. counterpart on Wednesday, as oil prices rose and Federal Reserve Chair Jerome Powell reassured markets that the central bank is not rushing to hike rates.

Markets were rattled last week when the Fed shifted to more hawkish guidance. But Powell on Tuesday said the economic recovery required more time before any tapering of stimulus and higher borrowing costs are appropriate, helping Wall Street recoup last week’s decline.

Canada is a major producer of commodities, including oil, so its economy is highly geared to the economic cycle.

Brent crude rose above $75 a barrel, reaching its highest since late 2018, after an industry report on U.S. crude inventories reinforced views of a tightening market as travel picks up in Europe and North America.

The Canadian dollar was trading 0.3% higher at 1.2271 to the greenback, or 81.49 U.S. cents, after touching its strongest level since last Thursday at 1.2265.

The currency also gained ground on Monday and Tuesday, clawing back some of its decline from last week.

Canadian retail sales fell by 5.7% in April from March as provincial governments put in place restrictions to tackle a third wave of the COVID-19 pandemic, Statistics Canada said. A flash estimate showed sales down 3.2% in May.

Still, the Bank of Canada expects consumer spending to lead a strong rebound in the domestic economy as vaccinations climb and containment measures ease.

Canadian government bond yields were mixed across a steeper curve, with the 10-year up nearly 1 basis point at 1.416%. Last Friday, it touched a 3-1/2-month low at 1.364%.

(Reporting by Fergal Smith; editing by Jonathan Oatis)

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Economy

Toronto Stock Exchange higher at open as energy stocks gain

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Toronto Stock Exchange edged higher at open on Wednesday as heavyweight energy stocks advanced, while data showing a plunge in domestic retail sales in April and May capped the gains.

* At 9:30 a.m. ET (13:30 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was up 16.77 points, or 0.08%, at 20,217.42.

(Reporting by Amal S in Bengaluru; Editing by Sriraj Kalluvila)

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