Cheery figures came out this morning from Statistics Canada, concerning this country's trade with the rest of the world.
The January merchandise trade deficit of $0.2 billion was smaller than the $0.6 billion expected going into the report. As well, the deficit in December was revised significantly lower to $0.3 billion relative to the previously reported $0.9 billion. Encouragingly, exports rose a solid $0.8 billion (2.1%) though it was almost fully offset by an equally strong $0.7 billion (1.9%) rise in imports.
The increase in exports was led by energy products ($0.6 billion or 6.7%) and metal and non-metallic mineral products ($0.5 billion or 10.5%). The main offset was a $0.4 billion (7.6%) drop in the motor vehicle component.
On the import side the strength was led as well by the energy component up $0.5 billion (11.8%) in the month. There were also gains in metal ores ($0.3 billion or 36.5%) and industrial machinery, equipment and parts ($0.2 billion or 5.3%). The strength in the latter provides an early indication that business investment continued to grow going into 2013. The main offset by a $0.4 billion (10.8%) drop in the metal and non-metallic mineral products.
On a volumes basis (using 2007 chained dollars), exports rose 1.8% though this was fully matched by a 1.8% gain in imports. This resulted in constant dollar trade deficit remaining unchanged from December at $0.5 billion though down from the fourth-quarter monthly average of $1.2 billion.
"The improvement in the January trade balance, on a volumes basis, relative to the Q4 monthly average," according to experts at RBC Economics, "is encouraging and consistent with our view that trade will add at least one percentage point to annualized growth in the first quarter. Any support to the pace of activity is welcome after disappointing gains over the second half of last year though this boost from net exports is only up slightly from the 0.7 percentage points lift recorded in Q4.
The bank continues, "the bigger contributor to our projection that overall Q1 GDP growth will recover to an annualized 1.9% from the 0.6% gain in Q4 is that inventories hold relatively steady after subtracting 2.6 percentage points in Q4. Confirmation of a reduced drag from inventories is expected to be reflected in the January GDP numbers, to be released the end of the month, reversing the 0.2% drop recorded in December."
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