OTTAWA (Reuters) - Canadian exports are finally starting to show signs of a persistent recovery, with analysts cheered by healthy volumes in January that rose sharply thanks to the weak domestic dollar and continued U.S. growth.
Although Statistics Canada said on Friday that the trade deficit had widened to C$655 million ($489 million) from C$631 million in December, markets paid much more attention to a 3.6 percent jump in volume.
“The long-awaited adjustment to the low dollar (and) firm U.S. consumer finally appears to be well under way, and the strong U.S. jobs data suggests it can continue for some time yet,” BMO Capital Markets Chief Economist Doug Porter said in a note to clients.
Analysts in a Reuters poll had predicted a shortfall of C$1.05 billion. January marked the 17th consecutive monthly trade deficit, reflecting continuing economic damage caused by weak oil prices.
The crude slump, though, has helped depress the Canadian dollar and make exports cheaper.
The Bank of Canada, whose next scheduled interest rate announcement is next Wednesday, has been counting on non-oil exports to help offset the sharp pullback in investment in the energy sector caused by crude’s slide.
The value of exports grew by 1.0 percent overall to a record C$46.00 billion even as prices fell by 2.5 percent. When energy products were stripped out, the increase in the value of January exports was 2.3 percent.
“A very, very strong month, the third one in a row ... it’s given us fantastic momentum going into this year,” Export Development Canada Chief Economist Peter Hall said in a phone interview.
Imports climbed 1.1 percent to C$46.65 billion as nine of 11 sections increased. Volumes expanded by 1.6 percent while prices fell 0.5 percent.
The Canadian dollar firmed on the data, touching C$1.3392 to the U.S. dollar, or 74.67 U.S. cents, from $1.3416, or 74.54 U.S. cents.
Exports to the United States, which accounted for 76.0 percent of Canada’s global total in January, increased by 2.6 percent while imports grew by 1.1 percent.
As a result, Canada’s trade surplus with the United States grew to C$3.70 billion from C$3.13 billion in December.
Separately, Statscan said the labor productivity of Canadian businesses grew by just 0.1 percent in the fourth quarter of 2015, down from 0.4 percent in the third quarter.
Reporting by David Ljunggren; Editing by Bernadette Baum