OTTAWA (Reuters) - Canada unexpectedly posted its first trade surplus in 22 months in October but the surprise news was less upbeat than it looked at first, given that both imports and exports fell.
Statistics Canada said on Wednesday the October surplus was C$75 million ($70.1 million), the first since the C$2.43 billion posted in December 2011. Analysts had been expecting a shortfall of C$730 million.
The Bank of Canada says there is still plenty of slack in the economy and regularly expresses concern about the important export sector, which is having trouble coping with weak foreign demand and a strong Canadian dollar.
Imports dropped by 1.2 percent compared to a fall of 0.3 percent for exports, while export volumes dropped by 0.6 percent - hardly the sign of an economy working at anything like full speed.
“All told, a cheery headline in terms of the support for the Canadian dollar, but not great news in terms of the impact on real gross domestic product given the drop in export volumes,” Avery Shenfeld of CIBC World Market Economics said in a note to clients.
Exports fell on lower shipments of motor vehicles and parts, metal and non-metallic mineral products and aircraft and other transportation equipment.
“October’s decline in export volumes illustrates that any export-led recovery is still some way off,” said David Madani, a Canada economist at Capital Economics.
Imports dropped on lower shipments of energy products and motor vehicles and parts.
The Canadian dollar took its cue from the Bank of Canada, which kept rates steady on Wednesday and said inflation could be softer than expected. The news pushed the currency down to C$1.0680 to the greenback, or 93.63 U.S. cents, compared to Tuesday’s close of C$1.0649 or 93.91 U.S. cents. <CAD/>
Peter Hall, chief economist at Export Development Canada, said he found it hard to get excited about a month where imports fell faster than exports.
“It’s sort of a bipolar month because you have some really good stuff on the export side and some really bad stuff,” he told Reuters.
Exports of motor vehicles and parts dropped by 5.0 percent, a performance that Hall called “horrible”, while metal and non-metallic mineral products fell by 6.2 percent.
On the positive side, consumer goods rose by 6.2 percent on shipments of exports of pharmaceutical and medicinal products, while exports of farm, fishing and intermediate food products jumped by 11.8 percent.
Exports to the United States, which comprised 75.2 percent of all Canadian exports in October, grew by 0.2 percent while imports rose by 1.0 percent. As a result the trade surplus with the United States fell to C$3.93 billion from C$4.13 billion in September.
Additional reporting by Leah Schnurr in Toronto; Editing by Krista Hughes and Chris Reese