OTTAWA (Reuters) - Canada’s trade surplus jumped by a startling 78 percent in February despite strength in the Canadian dollar, a performance that economists said might not be maintained but was still indicative of economic strength.
Statistics Canada said on Thursday that the surplus rose to C$4.94 billion ($4.84 billion) in February from C$2.78 billion in January. It was the biggest monthly surplus since May 2007 and the largest rise since June 2004. Analysts had expected a surplus of C$3.3 billion.
The gain was entirely in trade with the United States, with which the surplus jumped to C$8.10 billion from C$6.29 billion, the highest level since December 2006.
“So much for the idea that the currency market would sort out all the problems of the U.S. trade deficit,” HSBC Securities strategist Stewart Hall wrote to clients.
A striking feature of Thursday’s report was that the jump in exports, to C$39.32 billion from C$37.88 billion in January, was due solely to a 3.8 percent rise in volumes. Two-thirds of the increase was concentrated in the auto and energy sectors.
Imports fell to C$34.39 billion from C$35.10 billion in January, with energy dropping most. It was the first decrease since October 2007, with prices falling 1.2 percent and volumes declining by 0.8 percent. All figures are seasonally adjusted.
“Bizarrely, exports have managed to nudge up 1.1 percent in the past 12 months, while imports are down 1.2 percent year on year,” BMO Capital Markets deputy chief economist Douglas Porter said. “Burn all the economics textbooks -- that combination makes no sense.”
He said the trade surplus this year would be more than enough to offset Canada’s deficit in services, investment income and transfer payments, lifting the current account back into the black in the first quarter.
“The resilient trade story takes some of the pressure off the Bank (of Canada) to keep chopping (interest) rates aggressively,” Porter added.
The central bank cut its overnight rate by half a point on March 4 and said further monetary stimulus would likely be required in the near term. Its next rate announcement is on April 22.
Reporting by Randall Palmer; Editing by Peter Galloway