Source: The Canadian Press

Canadian exporters had their best month in 30 years in December, in the most concrete indicator that rising demand in the United States is lifting boats north of the border as well.

Statistics Canada said Friday the country’s December trade balance shot back into surplus for the first time since last February. Energy exports were a major factor, but most other sectors also showed solid gains.

The $3-billion surplus caught economists by surprise — they had expected a $300-million deficit — and even more of a shock is that it was the right kind of surplus, based on a 9.7% pop in exports. That’s the biggest monthly gain in exports in 30 years.

The gain was big enough to cause the Bank of Montreal to upgrade its fourth-quarter forecast for Canadian economic growth to three per cent, from 2.3, as well as next year’s expansion to 2.8% from 2.7%.

“Every once in awhile, an economic report comes along that just makes you say wow,” said Douglas Porter, deputy chief economist with BMO Capital Markets.

“You don’t want to read too much into one month, but I can say any time we’ve had this kind of pop in Canadian exports it’s been in the heart of a major-league upturn in U.S. demand.”

Royal Bank economist Paul Ferley said the details in the report were as strong as the headline. The surplus was all due to exports, rather than falling imports, and primarily due to an increased volume of shipments, rather than price effects.

“This is a very strong report. Potentially we may give some back next month, but this is an encouraging sign at a time when we are looking at a high Canadian dollar with concern,” he said. “This report would suggest there is sufficient strength in the U.S. and elsewhere (to overcome the loonie anchor).”

Exports to the United States rose 10.8% to $26.7 billion, pushing the trade surplus with Canada’s largest trading partner to $5.1 billion from $3 billion the previous month.

Part of the increase may have been due to temporary factors, such as freezing temperatures in the U.S. fuelling energy exports, but the strength went well beyond oil.

The relatively weak auto component sets the stage for a pick-up in that sector in the upcoming months, analysts said.

“What’s good news is that it does show what has been part of a pattern of improving exports over several months,” said Trade Minister Peter Van Loan.

“Perhaps (this is) evidence of some economic recovery in the United States as well, which would be a good thing for Canada.”

Canada’s trade deficit with countries other than the United States fell to $2.1 billion in December from $3.1 billion in November. Exports to countries other than the U.S. increased 7.3%, while imports declined 1.9.

The trade result was sufficient to override a general flight to safety over the political crisis in Egypt, with the loonie rising 0.92 of a cent to 101.34 cents US

Scotiabank economists noted that the fourth quarter as a whole, not just the last month, showed exports will be a positive for the Canadian economy, after being a drag most of the past two years.

In dollar value terms, exports rose to $37.8 billion in December, with volumes up 6.6% and prices 2.9%.

Statistics Canada said the export increase was led by a 16.5% gain in volumes of energy products, followed by industrial goods and materials, which reached a record high.

Notable increases were also recorded in exports of machinery and equipment, agricultural and fishing products as well as forestry products.

The value of imports edged up 0.7% to $34.8 billion as import prices rose 0.4% and volumes increased 0.3.

All import sectors except other consumer goods posted gains in December; the main sources of growth were energy products, agricultural and fishing products, and automotive products.