Canada broke out of its months-long export slump in October, thanks to the U.S.

Exports advanced 2.7 percent in October, the first gain in five months, Statistics Canada said Tuesday from Ottawa, driven largely by a jump in sales to the the country’s biggest trading partner. The increased shipments halved the trade deficit to C$1.5 billion ($1.2 billion), below economist forecasts for a C$2.7 billion deficit.

It was unexpected strength for a trade sector that has been a great disappointment to policy makers this year, hampering an economy that is otherwise firing on all cylinders. Canada’s economy slowed sharply in the third quarter due to weak exports.

“This is a positive report, but there’s a still lot of room for improvement,” Benjamin Reitzes, a strategist at BMO Capital Markets in Toronto, wrote in a research note.

Exports in recent months had suffered one of their biggest tumbles ever, fueling concern the nation’s currency accelerated too quickly earlier this year. A recent drop in the Canadian dollar though—down almost 5 percent since peaking in September—may be providing some relief. So is steady domestic demand in the U.S.

Canada’s improved trade performance was driven by a 4.1 percent increase in exports to the U.S., helping to widen Canada’s surplus with its largest trading partner to C$3.5 billion in October from C$2 billion a month earlier. Separately, the Commerce Department reported the U.S. trade deficit widened in October to a nine-month high.

One factor was a jump in shipments of refined petroleum products, which Statistics Canada said may have been due to lower inventories along the East Coast.

Other Details

  • In total, Canada recorded higher shipments in nine of 11 sectors tracked by the agency
  • Imports fell 1.6 percent in October, reflecting an 8.1 percent drop in the motor vehicle category. The agency cited work stoppages and planned shutdowns for the drop
  • Deficits between June and September were revised down by C$666 million
  • In volume terms, adjusting for price changes, exports rose 1.2 percent while imports fell 3.9 percent