OTTAWA Canada recorded a surprise trade deficit in May as energy and grains dragged down exports, while unwrought precious metals as well as motor vehicles contributed to a surge in imports, Statistics Canada data showed on Thursday.

The country's trade deficit with the world came in at C$3.44 billion ($2.59 billion), the largest since October 2020, after a downwardly revised C$894 million surplus in April.

Analysts had forecast a surplus of C$1.15 billion.

Total imports increased 3% in May, capping three consecutive months of decline, helped by metal and non-metallic mineral products - largely unwrought gold, silver, and platinum group metals and their allows.

Motor vehicles and parts imports also contributed to the gain, rising 4.5% in May to reach a record-high C$11.3 billion. Higher imports of engines and parts reflected better supply chain conditions for Canadian automakers in 2023, Statscan said.

By volume, imports rose 3.5%.

Total exports decreased 3.8% during the same period, largely due to cheaper energy products as well as wheat and canola. By volume, exports declined 2.5%.

Demand for Canadian grains has slowed in recent months amid improving global supplies, especially for wheat and canola, Statscan said. This resulted in lower prices, providing an incentive for Canadian producers to wait for better market conditions.

($1 = 1.3277 Canadian dollars)

(Reporting by Ismail Shakil and Dale Smith in Ottawa; Editing by Devika Syamnath)