Canada returns to trade surplus, GDP growth eyed

OTTAWA : A surge in energy exports helped Canada post an unexpected trade surplus in September, the first since Januar

Published November 10, 2011 Updated November 10, 2011 04:01pm

2 min

By Imad Uddin

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Overall exports leaped by 4.2 percent on the back of an 11.3 percent increase in shipments of energy products, producing a surplus of C$1.25 billion ($1.22 billion) after a C$487 million deficit in August, Statistics Canada said on Thursday.

Market operators, who had expected a deficit of C$570 million, said the figures should boost growth but added the souring world economy meant the effect would be temporary.

Canada's economy shrank by an annualized 0.4 percent in the second quarter as exports provided a significant drag.

"Third-quarter GDP looks on track to hit 3 percent annualized, led by a sharp gain in exports (nearly 18 percent annualized in the quarter)," said Emanuella Enenajor at CIBC WM Economics.

Exports of petroleum and coal rose 36.4 percent to the highest level since July 2008 as prices soared and refineries reopened after shutdowns for maintenance and expansion.

Overall exports shrank by 0.3 percent from August, pulled lower by a 3.3 percent drop in machinery and equipment. Imports of automotive products fell by 5.5 percent.

"This report solidifies the view that net exports are going to add meaningfully to third quarter real GDP growth," said Sherry Cooper, chief economist at BMO Financial Group.

"However, with the global economy slowing into the fourth quarter, don't expect trade to repeat its strong performance."

The data initially pushed the Canadian dollar higher but it later fell back. At 10:22 a.m. (1522 GMT) it was at C$1.0203 versus the greenback, or 98.01 US cents, after hitting a session high of C$1.0168, or 98.35 US cents.

On Wednesday, it closed at C$1.0217, or 97.88 US cents.

TD Securities strategist David Tulk said the drop in imports of machinery and equipment would hit domestic investment.

"Looking ahead to the final quarter of the year, we do not anticipate that this positive contribution can be sustained and expect that growth will also moderate," he said.

Exports to the United States, by far Canada's top trade partner, rose by 5.0 percent, while imports fell by 1.0 percent. The bilateral trade surplus increased to C$4.36 billion from C$2.79 billion in August.

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