OTTAWA — Canada’s trade surplus shrank to a disappointing $116 million in January, dampening hopes exports could become an important driver of economic and jobs growth this year.
As well, Statistics Canada lowered December’s massive trade number, reducing the originally reported $3 billion surplus to $1.7 billion.
Based on the end of year result, economists had expected another big month in January, with a surplus of $2.6 billion.
Still, the news was not all bad, said analysts, particularly compared to last year’s results when trade was a major drag on economic growth.
“December seemed too good to be true at the time and indeed it was,” said economist Douglas Porter of BMO Capital Markets.
“I think the overall results are fairly close to the underlying trend. We’re likely to see the trade balance sort of bob around between small deficits and small surpluses and end up pretty close to balance this year.”
That’s a marked improvement from the average monthly deficit of about $750 million seen throughout 2010.
Analysts also noted that exports continued to grow in January by 0.8 per cent, building on 7.9 per cent surge in December.
The key difference in January was that imports rose sharply — up 5.3 per cent to $37.4 billion — following December’s modest 1.5 per cent gain.
“The mere fact that exports were able to record a fourth consecutive month of gains despite a Canadian dollar hovering around parity ... is certainly the most positive aspect of today’s report,” said TD Bank’s Francis Fong.
“This further solidifies that a sustained recovery in the final lagging sector of the Canadian economy (exports) is well on its way.”
The big mover in January was autos, with exports increasing by 16.3 per cent and imports by 16.2 per cent in value terms. While imports detract from the trade balance, analysts pointed out that much of those imports are parts coming into Canada to sustain domestic production of vehicles, which boosts economic growth overall.
“Stronger automotive activity in the trade report suggests a rebound in vehicle production could lift January’s gross domestic product figure,” Emanuella Enenajor, an economist CIBC, said in a note.
Overall, exports rose a modest 0.8 per cent to $37.5 billion in January, following a still large 7.9 per cent gain in December.
Meanwhile, Canada’s trade surplus with the United States declined from $4.3 billion in December to $3.8 billion in January.
Imports from the U.S. rose 6.5 per cent, reflecting strong gains in imports of automotive products, while exports rose 3.3 per cent, up for a fourth consecutive month.
A significant increase was also recorded in imports of machinery and equipment.