It's almost as if we're back in the 20th century again: Cars and auto parts have surpassed energy as Canada's biggest export.
According to StatsCan data released Thursday, the country sold $7.56 billion worth of motor vehicles and parts in July, compared to $7.33 billion in energy exports.
Auto exports are up 11.1 per cent compared to a year earlier, while energy exports are down 34.6 per cent.
According to Bloomberg, it's the first time since 2007 that energy hasn't been Canada's biggest export, and the shift is yet another sign that the oil price collapse is radically altering Canada's economy.
The trend is good news for central Canada's long-struggling manufacturing sector, which has lost hundreds of thousands of jobs since the start of the century. Economists have been saying since last year that the loonie's steep drop against the U.S. dollar would help manufacturers, but until now the evidence of a turnaround in manufacturing was slim.
Of course it'll take more than one month of strong exports to be sure Canada can actually build a new economy in the age of cheap oil. StatsCan's GDP report earlier this week showed manufacturing output is still down from a year ago, with output shrinking 1.7 per cent in June from a year earlier.
All the same, economists at Canada's big banks were happy with today's trade numbers, arguing they show the country 's economy is set to rebound in the third quarter, after falling into recession in the first two quarters of 2015.
"There's no two ways about it, this is a solid report,'' Bank of Montreal senior economist Benjamin Reitzes wrote in a report.
"It looks like better U.S. growth and the weaker Canadian dollar might finally be providing a boost to trade.''
Overall, Canada's trade deficit narrowed to $593 million in July from June's revised deficit of $811 million. The June deficit had initially been reported at $476 million.
Economists had expected a deficit of $1.3 billion for July, according to Thomson Reuters.
The Bank of Canada, which is expected to make its next interest rate announcement next week, has predicted the economy will grow at an annual pace of 1.5 per cent in the third quarter before picking up to a 2.5 per cent pace in the last three months of the year.
CIBC economist Nick Exarhos said the July trade data suggests third-quarter economic growth could come in above the central bank's forecast.
"After a strong end to the second quarter with June's 0.5 per cent gain in monthly GDP, the gain in non-energy exports and the advance in real volumes points to July following up with a healthy reading of its own,'' he said.
"That should be enough to keep governor (Stephen) Poloz on the sidelines, with the fourth quarter being the key in charting the course of the economy — and monetary policy — heading into 2016.''
The Bank of Canada has cut its key interest rate twice this year in an effort to boost the economy, which has struggled with the sharp drop in oil prices.
— With files from The Canadian Press
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