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Canada’s trade in goods continued to reawaken from its COVID-19 slumber in July, as a second straight month of double-digit percentage gains in both exports and imports has quickly narrowed the gap with prepandemic levels.

Statistics Canada reported that merchandise exports surged 11.1 per cent in July, adding to June’s 21-per-cent rebound, as exporters in the auto sector and elsewhere made up for lost time amid a further reopening of economic activity after COVID-19 shutdowns. The story was similar in imports, which rose 12.7 per cent in July, building on June’s 20-per-cent jump.

The larger recovery in imports in July meant that the country’s merchandise trade deficit widened to $2.5-billion, from a revised $1.6-billion in June.

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But the much bigger story was the further rapid recovery from the deep plunge in trade in the spring, when the pandemic forced widespread shutdowns in Canada and abroad and ground shipments of many goods to a crawl.

Total trade in July was 5 per cent less than during the last pre-COVID-19 month in February – still significant, but a dramatic turnaround from the 30-per-cent hole in the trade numbers in April and May.

“This report provides additional evidence that Canada’s economy is recovering from the pandemic more quickly than we had originally expected,” said Paul Ashworth, chief North America economist at Capital Economics, in a research report.

The July gains were led by a resurgence in both imports and exports of automobiles and parts, as the sector continued to ramp back up after the pandemic forced North American assembly plants to cease production in the spring. Imports of vehicles and parts jumped 50 per cent in July, while exports were up 37 per cent.

Statscan said automakers have been trying to make up for their lost output over the spring – traditionally the industry’s peak production period – by increasing their production targets and shortening their usual summer maintenance shutdowns. Exports in July were above their prepandemic levels, although imports remained about 11 per cent short of their February mark.

Energy exports also continued to climb out of their deep hole, jumping 19 per cent in July, helped by both rising demand and recovering prices. But despite three straight months of gains, energy exports remained about 22 per cent short of their pre-COVID-19 levels, the agency said.

July’s encouraging numbers could still be subject to sizable revisions, if Statscan’s updates to its June figures are any guide. The agency increased its original estimate for exports by a substantial $1.2-billion, citing more detailed data revealing much higher crude oil exports than it had previously estimated. Coupled with a $400-million downward revision in imports, the June trade deficit was cut in half, to $1.6-billion from the original $3.2-billion.

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“These estimates can be subject to larger revisions during times of high volatility in energy prices,” Statscan said.

While economists were generally encouraged by the trade numbers, they said the remaining shortfall from pre-COVID-19 activity is an indication that the sector still faces challenges, amid weakened economies, continued border restrictions and still-substantial uncertainties about the course of the virus.

Notably, trade in services continues to struggle, as international travel, a key component of the sector, remains crippled by border restrictions. Statscan reported that services trade posted little change in July, with exports up 0.6 per cent and imports up just 0.2 per cent, and total trade remained near its pandemic lows, down nearly 30 per cent from precrisis levels. Exports of travel services – representing tourists coming to Canada – were down 62 per cent from February, while imports of travel services were down 91 per cent.

“Continued improvements in manufacturing sentiment south of the border, and the strong rebound in China’s industrial sector, bode well for global trade and Canadian exports. However, notable headwinds mean that the road forward for both is mired with uncertainty,” Toronto-Dominion Bank economist Omar Abdelrahman said in a research note.

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