Canada posted an unexpected trade surplus in November as a strengthening U.S. economy helped push exports to a three-year high, offering hope to a hard-hit sector.
Trade is a major driver of the economy and Canada sends about 70 per cent of its exports to the United States. A prolonged U.S. recovery would help exporters who have to deal with a strong Canadian dollar and uncertain overseas markets.
Canada recorded a trade surplus of $1.07-billion in November, pleasantly surprising analysts who had expected a $500-million deficit. October’s deficit of $487-million followed a $1.12-billion surplus in September.
“The improvement seen in two of the past three months is consistent with the better economic data we’ve seen from our neighbor to the south,” said Benjamin Reitzes of BMO Capital Markets Economics.
“The surplus is certainly welcome news, but its staying power is largely dependent on whether the U.S. economy continues to pick up steam.”
Exports to the United States increased by 1.9 per cent while imports dropped by 2 per cent, pushing Canada’s bilateral trade surplus up to $4.57-billion from $3.55-billion in October.
Overall exports jumped by 3.2 per cent from October to $40.09-billion, the highest level since the $41.98-billion recorded in October 2008. Energy exports climbed by 6.4 per cent, with crude petroleum hitting a record $6.38-billion.
Peter Hall, chief economist at Export Development Canada, a federal agency that assists exporters, noted a recent trend of strong sustained orders from the United States.
“We’re joined at the hip to these guys and we’re capitalizing on that ... it looks like the cork that’s been underwater for an awful long time is actually making a break for the surface,” he told Reuters.
The favorable data did not boost the Canadian dollar, which lost strength as its U.S. counterpart rose on gloomy news from Europe. At 10:47 a.m., the Canadian dollar was at C$1.0249 to the U.S. dollar, or 97.57 (U.S.), down from Thursday’s finish at C$1.0183 to the U.S. dollar, or 98.20 (U.S.)
In November, overall imports dropped by 0.8 per cent to $39.02-billion on lower shipments of automotive products as well as industrial goods and materials.
TD Economics analyst Leslie Preston sounded a note of caution, predicting that the promising trade picture for Canada could well fade in 2012.
“It is our view that the European recession and financial crisis will likely deepen in the coming months, having ripple effects on U.S. and global demand, resulting in slower export growth in Canada,” she said.