11/10/2011 08:40 EST | Updated 01/23/2014 06:58 EST

Canada Trade Surplus First Since January As Exports Grow, Imports Decline

OTTAWA - Canada continued to defy the global slowdown as recently as September, posting a surprisingly strong expansion in exports that gave the country its first trade surplus in eight months.

But at least one economist cautioned that with the global economy heading for a slower period, this may be the last "good number" Canada sees for a while.

Analysts said the rebound in exports, despite considerable headwinds from Europe and the United States, likely pushed the increase in Canada's gross domestic product to about three per cent in the third quarter. That would be one point higher than the Bank of Canada's recently revised call.

Statistics Canada reported the combination of a 4.2 per cent gain in exports and a 0.3 per cent decline in imports resulted in an overall $1.2-billion trade surplus, following August's $487-million deficit.

As is often the case, however, Canada's international trade would be in a deficit without its surplus with the United States — by far this country's biggest market.

In volume of shipments, taking currency fluctuations out of the calculation, the results were less flattering but still positive as exports rose 0.3 per cent and imports fell by 3.1 per cent.

Economists had expected another deficit in the neighbourhood of $500 million.

"This report solidifies the view that net exports are going to add meaningfully to Q3 real GDP growth," said economist Benjamin Reitzes of BMO Capital Markets.

"Indeed, real exports surged 18.3 per cent annualized in the quarter, the biggest gain in seven years, while real imports rose a tiny 0.2 per cent annualized."

But analysts also warned that September's numbers are not forward looking and Canada's exports will continue to face low global demand because of the turbulence in Europe, sluggish growth in the U.S. and moderating activity in emerging countries.

There were also a few flies in the ointment in the trade report. The biggest gain in September was due to temporary factors and aren't likely to be repeated in upcoming months, Scotiabank economists said.

Petroleum and coal volumes jumped 23.3 per cent in part because they were coming off several months of shutdowns at refineries.

As well, the decline in machinery and equipment imports gave off a negative signal that Canadian firms are tempering their enthusiasm for investments that will make them more efficient and competitive.

"We have capital spending shrinking, so if one is looking for a hint, that's the one I find a little bit worrisome because confidence has been shattered ... and businesses are starting to get quite cautious" on hiring and spending, said Bank of Montreal economist Michael Gregory.

"In terms of momentum going forward, it does seem this number may be the last good number for a little while."

Still, September was a solid month with six of seven sub-groups registering gains, including a strong 5.6 per cent pickup in auto shipments. Machinery was the only straggler, falling 4.9 per cent.

Overall, exports rose to $39.7 billion, the highest value since October 2008, as prices rose 3.9 per cent. Imports fell to $38.5 billion, as prices increased 2.8.

Exports to the United States increased five per cent to $28.2 billion, the highest value since January. Imports from the United States decreased one per cent to $23.8 billion.

As a result, Canada's trade surplus with the United States rose to $4.4 billion in September from $2.8 billion in August.

Exports to countries other than the United States rose 2.3 per cent to $11.5 billion, the fifth straight monthly increase. Imports from countries other than the United States rose 0.7 per cent to $14.7 billion.

Consequently, the trade deficit with countries other than the United States fell to $3.1 billion in September from $3.3 billion in August, the lowest level so far this year.