The Finance Department reported Friday that the government had taken in $2.16 billion more in revenues than it spent in January, following a $1.15 billion surplus the previous month — the best two-month performance since the recession.
For the first 10 months of the 2013-14 fiscal year, Ottawa's deficit stood at $10.5 billion compared to $13.9 billion for the same period last year.
Bank of Montreal chief economist Doug Porter cautioned that monthly fiscal reports from the department tend to be "lumpy," but called the numbers encouraging.
"I think it's pretty clear there is considerable underlying improvement going on," he said. "But even with the improvement, we've still got a deficit of more than $10 billion."
Porter said the trend of the past 12 months would suggest an annual deficit of about $15 billion, slightly ahead of the $16.6 billion deficit projected for the 2013-14 fiscal year in last month's budget. The fiscal year ends in March.
Porter said a key test of just how much the government's finances are brightening will be in the numbers from February and March.
When former finance minister Jim Flaherty issued his budget last month, analysts had speculated Ottawa might be able to declare victory on the deficit in the 2014-15 period, one year earlier than projected. That's because he forecasted a deficit of a mere $2.9 billion during the period, and the minister was including an accounting cushion of $3 billion for "risk" — which might never be needed.
The Harper government is counting on a significant surplus in 2015 in order to fulfil campaign promises dating back to 2011 — such as income splitting for families, or some variation of family tax relief — in time for the federal election scheduled for October of that year.
Even with the better numbers recently, Porter says the government will have to continue to clamp down on spending and hope for at least a moderate improvement in economic growth to meet the target.
The new numbers suggest the government is on pace, or just ahead, to do just that, barring a sudden lost of fiscal discipline or a major economic downturn.
For the month, the department said revenues increased 5.1 per cent, or $1.2 billion, "reflecting increases in most revenue streams." Meanwhile, program expenses fell by about $556 million.
For the first 10 months of the fiscal year, revenues are up 4.2 per cent, or $8.7 billion, while expenses are up 2.9 per cent, or $5.6 billion. Charges to service the debt were down $244 million.