Canada's headline oil-driven trade surplus in May points to improving prospects for business investment, according to Bank of Montreal Capital Markets (BMO) after Tuesday's data.
Imports of industrial machinery, equipment, and electronic components climbed more than 11% from a year earlier, the strongest increase in nearly four years, wrote BMO in a Tuesday note. Such gains have historically signaled stronger business investment.
On its own, the data point might not carry much weight. However, when combined with robust machinery and equipment investment intentions reported in the Bank of Canada's Business Outlook Survey and the federal government's continued push to encourage capital spending, it suggests business investment could be poised for a long-awaited recovery, added BMO.
"For sectors not directly affected by [U.S.] tariffs, the outlook appears to be firming," stated BMO Senior Economist Robert Kavcic.