Are Things Picking Up?

The following article was forwarded to me this morning from a mortgage industry colleague. The data seems to point to great optimism about the short term economic fortune of the Canadian economy. I will be posting similar articles on my Lethbridge Alberta blog.

December exports surge to 30 year high OTTAWA – Canadian exporters had the best month in 30 years in December, in the most concrete indicator that the pick-up in demand in the United States is lifting a lot of boats north of the border as well.

Statistics Canada said Friday the country’s trade balance shot back into surplus in the final month of 2010 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 per cent pop in exports. That’s the biggest monthly gain in exports in 30 years.

The exports explosion 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 per cent from 2.7 per cent.

“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 per cent to $26.7 billion, pushing the trade surplus with Canada’s largest economic partner to $5.1 billion from $3 billion the previous month. Canada’s trade deficit with countries other than the United States declined to $2.1 billion in December from $3.1 billion in November. Exports to countries other than the U.S. increased 7.3 per cent, while imports declined 1.9.

Ferley said there is potential for continued strength in the upcoming months because auto sales in the U.S. have been steadily rising, a phenomenon that has yet to be reflected in auto shipments out of Canada. The trade result was sufficient to override a general flight to safety over the political crisis in Egypt, with the loonie rising 0.17 cents to 100.59 cents US in early trading.

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 per cent and prices 2.9 per cent.

Statistics Canada said the export increase was led by a 16.5 per cent 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 per cent to $34.8 billion as import prices rose 0.4 per cent 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. http://www.therecord.com/news/business/article/484116--december-s-30-year-high-exports-surge-pushes-up-expectations-for-canada-economy