CORRECTED – WRAPUP 1-Canada has small trade surplus,home prices up

* Trade surplus smaller than expected

* C$, strong domestic demand pressure exports

* House prices rise 0.3 pct in April, 10th straight rise
(Corrects year-on-year new housing prices comparison to April
from March in the second last paragraph)

By David Ljunggren

OTTAWA, June 10 (BestGrowthStock) – Canada recorded a smaller than
expected trade surplus in April as a strong domestic currency
hurt exports and demand for Canadian goods outside of the
United States fell, government data showed on Thursday.

Other numbers showed continued strength in Canada’s housing
sector, with new home prices up for a 10th consecutive month,
but the pace is expected to cool in the second half of the year
as new taxes take a toll.

Statistics Canada said the nation notched a trade surplus
of C$175 million ($168 million) in April after a revised C$236
million deficit for March. Analysts surveyed by Reuters had
expected a surplus of C$500 million following the original
report of a C$254 million surplus in March.

The value of exports dropped by 1.0 percent to C$32.93
billion, the second consecutive monthly decline, on a fall in
the value of industrial goods and materials.

“If you look at the broader picture, it looks like the
strong Canadian dollar and strong domestic demand in Canada is
going to put downward pressure on net exports,” BMO Capital
Markets economist Robert Kavcic said.

“We saw net exports subtract from (economic) growth in the
first quarter and much of 2009 and we’ll probably see a small
drag on growth going forward for the rest of 2010 as well.”

Exports of energy products dropped by 2.6 percent to C$7.69
billion. Exports of natural gas dropped by 20.9 percent,
reflecting lower prices and volumes after a mild winter.

Imports fell by 2.2 percent to C$32.76 billion, also due to
a drop in industrial goods and materials. Metals and metal ores
were the main contributors to the decline, in particular a 30.8
percent drop in precious metals.

The trade surplus with the United States remained steady at
C$3.8 billion as exports rose by 0.7 percent, while imports
advanced by 0.9 percent.

“It was exports to other countries that declined 5.5
percent and drove the headline lower. Note that exports to the
EU plummeted 23.4 percent,” Scotia Capital economists said in a
research note.

With Canada exporting C$22 billion to the United States in
April but just C$2.6 billion to the European Union, the drop in
non-U.S. exports can get exaggerated, the economists said.

“In fact, this drives our point home: that improvements in
the U.S. economy matter more to Canada than the EU’s challenges
given that exports to the EU account for 8.5 percent of the
total whereas exports to the U.S. equal 72 percent of total
exports,” they wrote.

The Statistics Canada housing data showed prices of new
homes rose 0.3 percent in April, matching March’s increase and
in line with expectations.

The prices, which do not include taxes, rose in 11 of the
21 metropolitan areas, fell in four, and were unchanged in
six.

The nearly year-long boom in new house prices is expected
to wane, however, as a harmonized sales tax is introduced in
July in Ontario, Canada’s most populous province, and the
Western province of British Columbia, another big market.

“Strong gains in new house prices in the last couple of
months isn’t surprising because I think there is a lot of
demand being pulled forward because of the HST in B.C. and
Ontario,” BMO Capital’s Kavcic said.

“I think you’ll probably see the new numbers start to cool
in the second half of the year after the HST comes in and a lot
of that demand that was pulled forward is out of the system,”
he said.

“We’ve actually started to see some early signs that the
existing homes side of the housing market in Canada has started
to cool pretty quickly.”

The Bank of Canada’s decision to leave its key interest
rate at record lows for more than a year prompted some
economists to warn of a potential housing bubble, although the
government said it saw no signs of one developing.

The bank raised its key rate last week, and markets
generally expect it to do so again next month.

On a monthly basis, the housing-only component of the new
housing price index rose by 0.3 percent and the land-only
component edged up 0.1 percent. New home prices rose 2.5
percent in April from a year earlier.

Cities in the western half of Canada generally posted the
strongest gains from March, with prices in Regina and
Saskatoon, both in Saskatchewan, rising by 0.9 percent each.

Investing Analysis

($1=$1.04 Canadian)
(Additional reporting by Andrea Hopkins in Toronto; editing by
Peter Galloway)

CORRECTED – WRAPUP 1-Canada has small trade surplus,home prices up