MNI BRIEF: Canada Q1 Trade Surplus Is Widest Since 2008 On Oil

Canada posted the biggest merchandise trade surplus since 2008 in the first quarter as energy prices surged around the war in Ukraine, cementing the central bank's view the economy is pushing full capacity and bigger rate hikes may be needed to curb inflation.

The surplus climbed to CAD9 billion between January and March from CAD2.5 billion in the fourth quarter of last year, Statistics Canada said Wednesday. Exports rose 5.5% led by a 16% gain for energy on higher prices while imports gained 1.7%.

There was a surplus in each month of the quarter, and StatsCan raised its estimate for January to CAD3.5 billion to CAD3.1 billion, and for February to CAD3.1 billion from CAD2.7 billion. The March surplus of CAD2.5 billion included record imports and exports. 

First quarter GDP growth may double the BOC's projection of a 3% annualized pace as the economy re-opens and the Ukraine invasion boosts commodity exports. Rapid inflation will lead the Bank of Canada to hike its 1% rate to 1.5% on June 1, economists say.

StatsCan also reported separately that the country's services trade deficit widened to CAD1 billion in March from February's CAD578 million as people spent more on foreign travel.