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MNI DATA IMPACT: Canada Jan Trade Surplus Widest Since 2014

OTTAWA (MNI)

Canada's trade balance began 2021 with an unexpected surplus that was the largest since 2014, a big positive surprise that may brighten the central bank's forecast for the economy to shrink in the first quarter amid new Covid-19 health restrictions.

The merchandise trade surplus was CAD1.4 billion, Statistics Canada said Friday, compared with the economist consensus of CAD1.3 billion deficit.

Exports rose 8.1% on the month with gains in every major category. Excluding last year's rebound from the first pandemic lockdown, it was the strongest gain since 1995. January's CAD51.2 billion of shipments are now higher than they were before the pandemic, and still lag a May 2019 peak of CAD52.5 billion.

Part of the gains appear to reflect the unusual nature of the pandemic. Exports of transportation gear jumped 72% as a major airline put a group of aircraft into retirement by shipping them to the U.S., which could reflect the slump in travel. There was also a big jump in sales of gold bars to Americans in January, at a time when some investors fear a burst of inflation amid massive policy stimulus.

More traditional export gains were led by a 9% rise in crude oil and a 30% jump in lumber exports to a record high CAD2.1 billion. Demand for wood has surged in recent months amid a homebuilding spree in the U.S.

Canada's trade surplus with the U.S. widened to the highest since 2008 at CAD6.2 billion in January from CAD2.5 billion in December.

Gains in trade add to signs of resilience including Statistics Canada's recent flash estimate that GDP gained 0.5% in January even as authorities issued a second round of tighter health restrictions. The Bank of Canada has said the economy probably shrank at a 2.5% annualized pace in the first quarter due to lockdowns.

MNI Ottawa Bureau | +1 613-314-9647 | greg.quinn@marketnews.com
MNI Ottawa Bureau | +1 613-314-9647 | greg.quinn@marketnews.com

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