Source: The Canadian Press

Canada’s merchandise trade picture brightened somewhat in August, largely as a result of higher auto exports and fewer imports from the United States — a trend that’s likely to be short-lived.

Economist Brian Bethune of IHS Global Insight said the biggest factor was likely an unsustainable spurt of exports of passenger cars to the United States.

That lifted exports to the Canada’s largest trading partner by a sizable 2.7%, roughly doubling this country’s surplus with the United States to $2.9 billion from $1.5 billion in July.

“I would really be surprised to see that repeated in September,” said Bethune.

“But it does improve the picture for trade in the third quarter . . . It’s not going to be the big drag as we thought.”

The overall $1.3-billion trade deficit in August was still a long way from pre-recession strength, but $1 billion better than analysts had forecast and a big improvement over a record $2.5-billion shortfall in July.

Canada’s trade deficit with countries other than the United States rose to $4.3 billion in August from $4.1 billion in July.

Statistics Canada says exports to the world at large rose 3.1% to $34 billion after two months of declines — almost all due to a higher sales volume — while imports fell 0.5% to $35.3 billion.

Many economists are estimating Canada’s economic growth slowed to about 1.5% in the just-completed third quarter, after advancing 2% in the second and 5.8% in the first.

Trade, and particularly exports, have been the weak link in the Canadian economy throughout the recession, and to some extent during the recovery.

But now analysts note that construction is also adding ballast, particularly with the demand for new homes cooling.

Going forward, exports of manufactured goods are likely to remain among the weakest contributors to growth, said CIBC economists Krishen Rangasamy and Emanuella Enenajor in an analysis.

They point out August exports that the American consumer is still on his knees, the U.S. housing market in shambles, and the Canadian dollar is again knocking on the door to parity — all poor indicators for exporters.

Even with the better results, August exports are still below what they had been in May.

“It’s too early to open the champagne bottle and declare the global slowdown over,” the CIBC economists write.

“If, as we expect, the U.S. recovery ramps down to sub-2% growth in coming quarters, trade will be a drag on the Canadian economy.”

While most of the action was on volumes of trade in January, price effects did exert an influence on the bottom line. For instance, imports fell 0.5% largely due to a 0.8% decline in prices paid.

The main sectors behind the decline in imports were automotive products and industrial goods and materials. These declines were tempered by increases in imports of other consumer goods and energy products.

Aside from action with the U.S., exports to other countries grew 4.2%, while imports rose 4.5%. Both gains were largely due to increases in trade with the European Union.

Industrial goods and materials and other consumer goods accounted for over three-quarters of the growth.