Canada reported a small trade surplus, its first in five months, in February as exports bounced to their highest since before the 2008 recession, welcome news for the central bank but likely not enough for it to declare a full-blown export recovery.
Statistics Canada reported a surplus of C$290 million ($264 million) for February on Thursday, against forecasts for a C$200 million surplus. In January the trade deficit was C$337 million.
The report was the latest piece of upbeat data on the Canadian economy following a weak start to the year, but analysts still see net exports making a very small contribution to economic growth in the first quarter.
“Despite the decent rebound in exports and only small increase in imports, it looks as though trade will struggle to add to growth in the first quarter,” Benjamin Reitzes, senior economist at BMO Capital Markets, said in a note to clients.
Imports jumped 2.1 percent in the month to a record high of C$42.06 billion on increases in shipments of energy products, autos, and machinery and equipment.
But they were overshadowed by a 3.6 percent surge in exports to C$42.35 billion on shipments of motor vehicles and parts, and crude oil and bitumen.
The last time exports were above that level was in August 2008, following a historical peak in July of that year.
Overall exports in February increased 2.2 percent in volume and prices rose 1.4 percent.
Exports to the United States, by far Canada’s biggest market, shot up 4.4 percent in February and were also at the highest level since July 2008.
The gains may reflect the end of weather-related interruptions and weakness in the Canadian dollar rather than a stronger trend.
“There is a lot of uncertainty here by way of the mixture of one-offs (weather disruptions on production, strikes etc) versus what is going on in the underlying trade picture,” said Derek Holt and Dov Zigler, economists at Scotiabank Economics, in a note to clients.
“So the Bank of Canada will remain very cautious on the trade sector of the economy when it releases the April Monetary Policy Report,” they said, referring to the bank’s quarterly forecasts scheduled for April 16.
Bank of Canada Governor Stephen Poloz has called the country’s export performance “disappointing” as it has lagged a recovery in other parts of the economy. He has noted that exports have not reacted to increased U.S. demand the same way they have after previous recessions.
On March 18, Poloz said he’d seen no evidence yet that a recent depreciation of the Canadian dollar was having any effect on the trade sector. He said that in any case U.S. economic growth would have a bigger influence on trade than the exchange rate.
The Canadian dollar, which has fallen 7 percent against the U.S. dollar since Poloz adopted a more dovish stance on monetary policy last October, strengthened modestly on Thursday after the trade data.
The Canadian dollar was at C$1.1022 to the greenback, or 90.73 U.S. cents, firmer than Wednesday’s close of C$1.1035, or 90.62 U.S. cents.
February’s 9.7 percent increase in vehicles and parts shipments, which accounted for much of the export growth, only partially made up for the 11.3 percent drop in January due to extended plant shutdowns in Canada and the United States, Statscan said.
Exports of energy products jumped 4.3 percent, led by crude oil and crude bitumen. (Reuters)