Canada trade deficit narrows as dependence on US wanes

Canada's trade deficit narrowed to 4.2 billion Canadian dollars (USD 3.1 billion) in January as commerce with countries other than the United States ramped up, the government statistical agency said Wednesday.

The figure, following a record trade deficit of 4.8 billion Canadian dollars (revised upward) in the previous month, was higher than economists had expected.

"Overall, the data out today continue to provide a mixed picture of the Canadian economy," said CIBC Capital Markets analyst Royce Mendes.

According to Statistics Canada, exports rose 2.9 per cent to 47.6 billion Canadian dollars in January.

Higher exports of refined gold to Britain and gold transfers to Hong Kong within the banking sector, as well as increased transportation equipment sales to Saudi Arabia, were partially offset by lower exports of soybeans to China, it said.

After five consecutive monthly decreases, energy exports rose in January to 7.1 billion Canadian dollars. That was driven by a 36.5 per cent increase in crude oil exports on the strength of higher prices.

The rebound in export oil prices, however, remained 40.1 per cent below a peak in July.

Imports, meanwhile, rose 1.5 per cent to 51.8 billion Canadian dollars, led by a record 2.7 billion Canadian dollars or 52.6 per cent increase in aircraft and parts purchases. That was partially offset by lower energy imports.

Canada's trade surplus with the United States -- its neighbor and largest trading partner -- narrowed for the sixth consecutive month to 1.6 billion Canadian dollars in January.

After five consecutive monthly declines, exports to the US rose 1.1 per cent on the crude oil strength while imports rose 1.8 per cent.

Meanwhile, exports to other countries rose 7.9 per cent. And imports rose 1.1 per cent to 19.4 billion Canadian dollars, surpassing the previous month's record.

Contributing to that increase were Belgium (pharmaceutical products), Britain (aircraft and aircraft parts), Saudi Arabia (crude oil), China (various products) and Mexico (various products).

These gains were partially offset by lower imports from Brazil (bauxite) and South Korea (iron and steel products).