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OTTAWA: Canada’s trade surplus with the world narrowed in February to C$1.04 billion ($824 million) as a global shortage of semiconductor chips hit both imports and exports, Statistics Canada said on Wednesday.

Analysts polled by Reuters had predicted a surplus of C$1.00 billion after a revised C$1.21 billion surplus in January. It was the first time since late 2016 that the trade balance was in surplus for two consecutive months, Statscan said.

Exports were down 2.7%, with exports of motor vehicles and parts decreasing by 10.2% as assembly plants were forced to slow production because of the lack of semiconductor components, Statscan said.

“The world is firing up, as we know, and there are supply constraints all over the place,” said Peter Hall, chief economist at Export Development Canada.

“It’s already ricocheting through supply chains,” he added, pointing to lower exports of metal ores and metal products.

Energy exports were a bright spot, rising 18.3%, their highest level since December 2019. This was driven by higher prices caused by extreme weather and a massive power outage in Texas.

Canada’s economy is expected to expand 4.4% in 2021, after shrinking 5.4% in 2020 amid the coronavirus pandemic, according to IMF estimates.

In February, imports fell 2.4%, with imports of motor vehicles and parts falling 7.8%, again tied to the semiconductor issues.

“Another issue is shipping capacity. Right now all the containers are in the wrong places,” said Hall.

Shipping disruptions, including the grounding of the Ever Given on March 23 which blocked the Suez canal for almost a week, are expected to weigh on trade for another month. But economists noted recent business surveys suggest the outlook for exports has improved.

“That probably reflects the fast-recovering US economy,” said Stephen Brown, senior Canada economist at Capital Economics in a note. The US is Canada’s largest trading partner.

Canada’s trade surplus with the United States rose to C$6.8 billion in February, its largest since September 2008.

The Canadian dollar extended its decline after the data, touching a one-week low of 1.2623 to the greenback, or $79.22 US cents.