Canada recorded the smallest merchandise trade deficit in almost a year in January on higher exports of crude oil and bitumen.
The deficit of C$237 million ($230 million) followed a revised December shortfall of C$332 million, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg forecast the deficit would be C$600 million, based on the median of 20 forecasts.
The country’s dollar strengthened from an almost eight-month low after the report, which follows recent data on employment, inflation and economic growth that fell short of analyst forecasts. The Bank of Canada yesterday softened language on raising interest rates, saying that while the global recovery is proceeding as expected, the domestic economy has “material excess capacity.”
“The external sector is off to a decent start to this year and that’s a welcome development,” said Mazen Issa, Canada macro strategist at TD Securities in Toronto. “Having a U.S. recovery is critical for the Canadian export sector to come back and there is some scope for that to occur.”
The Canadian dollar rose 0.3 percent to $1.0288 per U.S. dollar at 10:03 a.m. in Toronto. One dollar buys 97.21 U.S. cents. The exchange rate touched C$1.0337 yesterday, close to the weakest level since June.
Exports rose 2.1 percent to C$39.1 billion in January, led by a 6.7 percent increase in energy to C$9.15 billion. Imports rose 1.9 percent to C$39.3 billion, Statistics Canada said.
The volume of exports advanced 0.9 percent and import volumes rose 1.8 percent, Statistics Canada said. Volume figures adjust for price changes and can be a better indicator of how trade contributes to economic growth.
The faster gain in import volumes means trade will still be a “drag” on economic output in January, Derek Holt, vice-president of economics at Bank of Nova Scotia in Toronto, wrote in a note to clients.
The surplus with the U.S. widened to C$4.25 billion in January from C$4.03 billion a month earlier.
The U.S. Commerce Department said today the American trade deficit grew to $44.4 billion from $38.1 billion in December as demand for imported crude oil rebounded.
Exports make up about one-third of Canada’s economy, with about 75 percent of the shipments going to the U.S.
Statistics Canada revised its estimate of December’s trade deficit to C$332 million from C$901 million after receiving updated data on energy shipments.
The January trade balance is the best since Canada recorded a C$21 million surplus in March 2012, Statistics Canada data show.