06/04/2013 09:17 EDT | Updated 08/04/2013 05:12 EDT

Canadian trade deficit jumps, but exports hold stead, continue to boost economy

OTTAWA - Canada's trade deficit widened to $567 million in April, as a big jump in imports along with a small setback on the export front combined to extend the country's losing streak with the rest of the world to 16 months.

Imports were especially strong in April, rising 1.2 per cent to a record level of $40.8 billion.

But analysts noted the Statistics Canada report was not as bleak as the headline suggested, as exports — which are key to economic growth — only slid 0.2 per cent to $40.3 billion after a strong March performance, and actually rose 0.7 per cent in volume terms.

"I would say that the marginal decline in exports is good news because it means that the growth we have seen to date is still built in," said Peter Hall, chief economist with Export Development Canada.

"For what it's worth, since last November, Canadian exports have been growing at a 13.5 per cent annualized pace, so if we're taking a breather this month, it's only a very slight one."

Bank of Montreal economist Sal Guatieri said he expects trade to provide a boost to Canada's economy in the current quarter, although less than the 1.5 percentage point lift provided in the first three months of the year.

"One encouraging sign is that total Canadian trade volumes (imports plus exports) have popped to a record level in recent months (and are) up a firm 3.5 per cent year-over-year," he said in a note to clients.

The Bank of Canada has been counting on exports, along with business investment, to provide momentum to the recovery, given that domestic consumption, particularly the housing market, is slowing or declining. But much of that will depend on what occurs in the United States, where three-quarters of Canadian exports head.

Hall says he is not convinced the mandated sequestration restraint in the U.S., which went into effect in March, will be as harmful to exporters as some believe.

"I think the jury is still out on sequestration because in some respects it doesn't seem to have affected us," he said. "U.S. consumers seem to be keeping their consumption going, and I've got very few reasons to believe that the (U.S.) housing market is going to do anything but continue to grow."

In April, Canadian shipments to the United States expanded by 1.8 per cent to $30.1 billion in the face of the sequestration, pushing the surplus Canada continues to enjoy with its southern neighbour to $3.9 billion.

Meanwhile, exports to other countries fell 5.6 per cent to $10.2 billion while imports from those countries were relatively unchanged at $14.6 billion, widening that trade deficit to $4.4 billion from $3.8 billion.

By industry, the big export movers in April were natural gas, up 14.3 per cent, and non-metallic mineral products, which rose 10.6 per cent.

But energy overall was down 1.7 per cent, industrial machinery, equipment and parts slid five per cent, and metal ores and non-metallic and non-metallic minerals fell 13.8 per cent.

On the imports front, energy products increased six per cent, motor vehicles and parts 1.9 per cent, and metal ores and non-metallic minerals 10.3 per cent. Imports of industrial machinery, equipment and parts declined 3.5 per cent.