03/07/2014 11:31 EST | Updated 05/07/2014 05:59 EDT

Trade gap shrinks in January amid anemic start to 2014

Canada's merchandise trade deficit narrowed in January to $177 million from $922 million the previous month, Statistics Canada reported Friday.

But the change was due to a decrease in imports, with exports showing only a marginal increase, a sign of a slow start to 2014 for the Canadian economy.

In volume terms, exports fell by 5.3 per cent, but in dollar terms they were up by just 0.2 per cent to $40.6 billion. The main increase was in energy products, which shot up in price in January amid record cold weather.

“Today's trade numbers are consistent with a weak start to 2014 for the Canadian economy as a whole,” TD economist Diane Petramala said in a note to investors.

“The decline in imports is largely consistent with the view that the buildup in Canadian inventories over the second half of 2013 will reverse course in 2014. Canadian businesses need to sell what they have before producing (or purchasing) more.”

She predicted real GDP growth would fall to below two per cent in the first quarter, based on the export data.

The slow recovery of exports has been a concern for economists watching the Canadian economy. But many say the cold weather is putting a drag on both exports and imports.

Trade surplus with U.S. $3.6B

Exports in motor vehicles fell by 11 per cent in the month, partly because of holiday shutdowns at plants in Canada and the U.S. But there were increases in shipments of fishing and food products, including wheat.

Exports to the United States edged lower by 0.1 per cent to $30.7 billion, while imports from U.S. declined an even larger 1.8 per cent to $27.1 billion. As a result, Canada's trade surplus with its nearest neighbour expanded to $3.6 billion from $3.2 billion in December.

Canada's trade deficit with the rest of the world narrowed by about $300 million to $3.8 billion.

The U.S. trade deficit widened slightly in January to $39.1 billion Us, up 0.3 per cent from December's revised $39 billion deficit, the Commerce Department reported Friday.

U.S. imports more oil

A rise in imports of oil and other goods from abroad offset a solid 0.6 per cent increase in exports. Exports climbed to $192.8 billion, led by increased sales of U.S.-made machinery, aircraft and medical equipment.

Imports also rose 0.6 per cent to $231.6 billion, reflecting a nine per cent jump in imports of petroleum. Imports of food and machinery also rose.

In 2013, the U.S. trade deficit dropped 11.2 per cent to $474.9 billion, providing a small boost to overall growth.

Sal Guatieri, senior economist at BMO Capital Markets, expects the U.S. trade deficit will continue shrinking this year, reflecting a shrinking U.S. energy deficit.