The latest fiscal accounting from the Finance Department shows the deficit at roughly half last year's level in the first four months of the 2012-2013 fiscal period.
In the March budget, Ottawa projected the deficit for the year would be $21.1 billion, or $3.8 billion below the previous year's shortfall.
As of July — one third of the way into the fiscal year — Ottawa's deficit stood at $3 billion compared with $5.9 billion for the first four months of 2011-12.
July was another good month for the government's books, relatively speaking, showing a $1.1-billion deficit compared with $1.7 billion for July 2011.
But TD Bank economist Sonya Gulati warned against projecting a lower deficit for the year as whole, citing the soft economy.
After a disappointing 1.8 per cent growth rate in the first half of the year, many economists anticipate that overall economic expansion for the year will come in slightly below two per cent, a little weaker than the budget's working assumption of 2.1 per cent.
Gulati said her bank's forecast is that nominal output, which is closely tied to government revenues, will come in lower than the government's estimate of $1.78 trillion even after the prudence factor — a margin for error — has been accounted for.
"With expenditures tracking close to budget estimates and revenue momentum likely to fade, there is some downside risk that this year’s deficit may be a bit larger come fiscal update time," she said.
"A possible offset could be lower debt servicing costs given the extended lower-for-longer interest rate profile."
In fact, the numbers show the cost to the government to service the national debt was down by $826 million in the first four months.
So far at least, revenues continue to come in stronger than the growth figures would suggest, putting Ottawa ahead of pace toward meeting its budget target.
For the first four months, revenues rose $3 billion, or 3.7 per cent, compared with the same period last year. Program expenses are also up but not as much — by $933 million, or 1.2 per cent.
In July, revenues increased by $153 million, or 0.8 per cent, while program expenses declined by $72 million.
The major negative for the month was that corporate income tax revenues were down 11.7 per cent, although they remain positive for the year.
Economists warn that government receipts and payouts are lumpy, meaning they are subject to misleading monthly variations. In recent statements, Finance Minister Jim Flaherty has said the government is roughly on track to meet its budget goals.
According to the budget projections, Ottawa believes it will be virtually in balance by 2014-15 and will record the first surplus since 2008 the following year.