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Canada's Stronger Current Account Signals Q2 GDP Growth Outlook, BMO Says

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The energy-led improvement in Canada's current account in the second quarter reinforces BMO Capital Markets' view of solid second-quarter gross domestic product growth.

The current account swung to a C$8.8 billion surplus in the second quarter from a C$8.3 billion deficit in Q1, ending four years of consecutive deficits, according to Statistics Canada data released on Thursday.

"The energy-driven boost to Canada's current account is one reason why we expect the economy expanded at a solid pace in Q2," wrote BMO Senior Economist Shelly Kaushik in a note.

However, the bank will be watching how heightened US trade uncertainty affects investment and other external flows in the third quarter, added Kaushik.

The turnaround reflected a stronger goods balance, boosted by higher energy prices. Merchandise trade should stay supported by restricted Strait of Hormuz activity, though US tariffs will offset some gains, according to BMO.

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