The overall surplus — which is mainly due to trade between Canada and the United States — fell from $2.9 billion in December as merchandise exports declined 2.3 per cent and imports edged down 0.6 per cent.
Lower shipments of precious metals and alloys as well as aircraft, engines and parts largely contributed to the decline, while higher exports of crude petroleum partially offset the decrease.
Still, Peter Hall of Export Development Canada said he remains optimistic about the exporting sector, noting that recent previous months recorded big gains.
"On balance, these numbers cement the huge growth we saw in November and December. We haven't seen that retrenchment some were suggesting might happen," he said.
The EDC chief economist said he had forecast exports would rise about seven per cent this year, but will be revising that prediction up given the stronger hand-off from the final months of 2011.
Overall, Canadian exports decreased to $41.4 billion in January, as prices fell 2.2 per cent, while imports decreased to $39.3 billion, with industrial goods and materials and energy products contributing the most to the decline.
Exports to the United States — by far Canada's largest trading partner — edged up 0.3 per cent to $30.6 billion, while imports from the United States slipped 0.3 per cent to $24.5 billion.
As a result, Canada's the trade surplus with the United States increased to $6.1 billion in January from $5.9 billion in December.
Exports to countries other than the United States fell nine per cent to $10.8 billion, while imports decreased 0.9 per cent to $14.8 billion.
The trade deficit with countries other than the United States increased to $4 billion from $3 billion in December.
Robert Kavcic, an economist with BMO Capital Markets, said the declines outside the United States were "pretty well across the board" but concluded that the Canadian trade picture continued to show signs of improvement.
"The surge in U.S. auto sales looks to be helping the Canadian trade picture, with automotive product exports up 6.1 per cent in January and a massive 36 per cent since August. In fact, the trade balance with the U.S., at $6.1 billion, is now the highest since September 2008," Kavcic wrote in a research note.
Avery Shenfeld of CIBC World Market Economics said the January numbers were "roughly in line" with the consensus estimate, but for the wrong reasons.
"Rather than the anticipated gains in imports, the trade downshift was driven by a 2.3 per cent decline in exports, although that was due to softer prices rather than a drop in volumes. Imports were also down on broad-based declines, also on softer prices," Shenfeld wrote.
He said the good news was that trade volumes were holding onto recent gains and that U.S. auto sales remained firm.
TD economist Francis Fong said goods moving to the European Union, where several countries are on the brink of recession, fell by 13.4 per cent in January, the single largest monthly decline in nearly a year.
"While not a decidedly positive report, it is important to keep in mind that this month’s moderation in exports follows two months of considerable gains. On a trend basis, the export sector has markedly improved," Fong wrote.
"All said, Canadian exporters will be a contributor to growth, but the high Canadian dollar and soft European demand still represent challenges. For the time being, we continue to look to domestic demand to be Canada’s main driver of growth."
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