UPDATE 2-Canada unexpectedly posts first trade surplus in 22 months

Wed Dec 4, 2013 10:55am EST
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* Canada posts modest C$75 million trade surplus

* Exports drop by 0.3 pct in October, imports down by 1.2 pct

By David Ljunggren

OTTAWA, Dec 4 (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.   Continued...