Canada’s trade deficit in goods jumped to a record high in March on a surge in imports, but analysts took heart in data showing healthy export growth, a sign the economy is performing well.
Statistics Canada said on Thursday that the deficit hit C$4.14 billion ($3.21 billion) in March, much higher than the C$2.24 billion shortfall predicted by analysts in a Reuters poll. The previous record was C$4.13 billion in September 2016.
After two weak months, exports posted a 3.7 percent gain to C$47.58 billion on exports of aircraft and other transportation equipment, in part due to a contract to supply armored vehicles to Saudi Arabia.
“This is a tremendous rebound which us very comforting. We are very happy to see that,” said Peter Hall, chief economist at Export Development Canada.
Wheat shipments jumped by 51.9 percent after a sharp fall in February amid rail transportation disruptions.
Imports grew by 6.0 percent to a record C$51.72 billion on increased shipments of motor vehicles and parts – in particular, passenger cars and light trucks – as well as consumer goods. In volume terms, imports rose 5.3 percent.
The Canadian dollar slipped to C$1.2870 to the U.S. dollar, or 77.70 U.S. cents, from C$1.2840, or 77.88 U.S. cents before the data were released.
Royce Mendes of CIBC Economics said the data though should not be written off as bad news.
“This report actually seems like good news from a GDP perspective given what it implies for domestic demand,” he said in a note to clients.
The Bank of Canada, which has long fretted about the sluggish performance of Canadian exporters, says the sector could be hit by uncertainty over the future of the North American Free Trade Agreement. Canada sent 73.4 percent of all goods exports to the United States in March.
The central bank, which has raised interest rates three times since last July, says it will look closely at domestic data before deciding when to hike again.
“I would say on balance they would see the strength in imports and exports as being more important than the deterioration in trade,” said Doug Porter, chief economist at BMO Capital Markets.
Exports to the United States rose 1.2 percent while imports increased by 3.1 percent. As a result, the trade surplus with the United States shrank to C$1.68 billion from C$2.28 billion in February.