Imports into Canada rose for the first time in five months in July, sending Canada’s trade balance into a deficit of $1.4 billion, Statistics Canada reported on Thursday.

The deficit marks Canada’s second-largest on record. It reverses a revised surplus of $37 million in the month of June.

Both imports and exports increased in the month of July, with imports up 8.3% to $31.7 billion and exports up 3.3% to $30.3 billion.

The boost in imports was widespread, but the main sources of growth were machinery and equipment, automotive products and energy products.

The growth in exports was primarily driven by machinery and equipment and automotive products, while declines in exports of energy products tempered the gain. Exports of energy products declined 3.2% to $6.4 billion, primarily due to an 8.9% plunge in crude petroleum exports.

Economists had expected a trade surplus of $100 million for the month. But the data is not necessarily negative, as it represents growth in domestic demand, according to BMO Capital Markets deputy chief economist Douglas Porter.

“The broad‐based gains in export and import volumes is another sign the Canadian recovery is indeed taking hold,” said Porter. He added that trade deficits in Canada are likely to continue as spending in Canada recovers at a faster pace than it does south of the border. “Trade shortfalls could become a semi-permanent feature on Canada’s economic landscape.”

Canada’s trade surplus with the United States shrank to $1.9 billion in July from $3.2 billion in June, as the growth in imports outpaced the increase in exports. Imports from the U.S. rose 9.9%, mainly due to higher imports of organic chemicals and aircraft. Exports rose 2.5%, mostly due to increases in exports of aircraft.

Imports and exports to countries other than the U.S. both advanced 5.7%, and the trade deficit with this group of countries grew to $3.4 billion in July from $3.2 billion in June.

Imports of automotive products surged a hefty 18.7% month-over-month, reaching $4.6 billion in July, but remained 32.7% lower than last year’s levels. Exports in the sector also jumped higher, rising 10.8% to $3.2 billion, but remained nearly 40% below the July 2008 value.

U.S. trade deficit jumps to US$32 billion
Data released by the U.S. Department of Commerce on Thursday showed that the U.S. trade deficit widened much more than expected to US$32 billion in July from US$27.5 billion in June.

Imports rose 4.7% to US$159.6 billion, while exports rose 2.2% to US$127.6 billion, with both increases driven by widespread gains. Imports were particularly bolstered by a 21.5% jump in automotive products, largely thanks to the “cash-for-clunkers” program that boosted demand among U.S. consumers.