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Statistics Canada says trade deficit increased to $655 million in January

OTTAWA – Canada’s merchandise trade deficit came in better than expected in January, helped by a strong gain in export volumes to kick off the year.

Statistics Canada said Friday the trade deficit increased to $655 million in January compared with $631 million in December.

The deficit was smaller than the $1.05 billion for the month that had been expected by economists, according to Thomson Reuters.

The increase came as imports rose 1.1 per cent in January to $46.7 billion as volumes increased 1.6 per cent and prices fell 0.5 per cent.

Exports totalled $46.0 billion, up one per cent from December, as volumes rose 3.6 per cent and prices declined 2.5 per cent. Exports excluding energy products increased 2.3 per cent.

“The solid gain in export volumes at the start of 2016 is yet another indication that the long-awaited transition to the non-resource sector is finally taking hold big-time,” BMO chief economist Doug Porter wrote in a note to clients.

“This is quite simply good news for the growth outlook, and puts a much healthier glow on GDP both for Q1 and for the year as a whole.”

The better-than-expected trade report follows news earlier this week that the economy grew faster than expected in the fourth quarter of last year.

The Canadian economy grew at an annual rate of 0.8 per cent in the last three months of 2015 amid economist expectations of no growth.

The trade deficit came as exports to countries other than the United States fell 3.7 per cent to $11.1 billion in January. Imports from countries other than the U.S. increased 1.1 per cent to $15.4 billion.

Exports to the U.S. climbed 2.6 per cent to $34.9 billion in January, while imports from the U.S. gained 1.1 per cent to $31.2 billion.

The increase in total imports came as nine of 11 sectors tracked posted gains, with advances by motor vehicles and parts as well as consumer goods partially offset by a drop in aircraft and other transportation equipment and parts.

Imports of motor vehicles and parts gained 3.3 per cent to a record $9.0 billion.

Gains in consumer goods as well as motor vehicles and parts helped fuel the growth in total exports. But that was moderated by declines in aircraft and other transportation equipment and parts as well as energy products.

Exports of consumer goods rose 13.7 per cent to $7.3 billion, while exports of motor vehicles and parts increased 7.2 per cent to $9.1 billion.

Exports of energy products fell 7.7 per cent to $5.5 billion in January as exports of crude oil and crude bitumen fell 11.3 per cent to $3.6 billion.