Merchandise exports recorded their largest gain in more than a year in July, as a result of a surge in exports to the United States.

Statistics Canada reported exports jumped 3.4% to $34.9 billion, the highest level since May 2001, in the wake of growth in all principal commodity groups.

Merchandise imports rose just 0.2% higher.

“Canada’s export performance is showing few ill effects of the cooling in global growth in recent months,” says BMO Nesbitt Burns.

Nesbitt says that the July export gains were spread across most categories of goods. “Consumer goods and autos were especially strong, stoked by persistent strength in U.S. retail sales, while energy and forest products also posted big gains. The latter was driven by a partial rebound in lumber, which took a devastating drop in the prior month when U.S. duties kicked in.”

“The strong export showing, consistent with sturdy manufacturing shipments data released yesterday, adds to the favourable outlook for July GDP,” comments CIBC World Markets. “Still, a clearer picture on monthly output will await upcoming reports on wholesaling and retailing.”

“Canada’s trade surplus remains at very healthy levels, and is still consistent with a large current account surplus. A cheap, cheap, cheap Canadian dollar is acting as a buffer for exporters,” says BMO

CIBC World Markets predicts, “Canada’s sturdy balance of payments position, in addition to widening overnight spreads, should help fuel a steady rally in the Canadian dollar through year-end and into 2003.” It sees a US70¢ by the end of 2003.