MNI: Canada Has Surprise Sept Trade Surplus On Export Rebound

Canada unexpectedly posted its first trade surplus in eight months in September on exports of gold and crude oil, narrowing the third quarter deficit and providing further optimism the economy is weathering the shock of U.S. tariffs the day after the central bank affirmed it's likely done cutting interest rates. 

The surplus was tiny at CAD153 million but much better than an MNI economist consensus for a deficit of CAD3.5 billion and the August deficit of CAD6.4 billion. Exports rose 6.3% on the month while imports fell the most since July 2023 with a 4.1% decline, Statistics Canada said Thursday. 

For the third quarter, exports also rebounded with a 2.4% gain after U.S. tariffs triggered a 13% plunge in prior three months. Imports declined by 2% in the third quarter, and combined that narrowed the trade deficit to CAD10.1 billion from CAD18.6 billion. 

The figures were delayed by the U.S. government shutdown that deprived StatsCan of U.S. customs data used to calculate exports. The agency cautioned the robust export data should be applied cautiously when considering potential revisions to third quarter GDP data, reported earlier as a 2.6% annualized increase. "Merchandise trade statistics have interdependencies with other components of GDP, and potential revisions to GDP are not possible to quantify until all components are recompiled. Third quarter statistics for GDP will be revised with the publication of fourth quarter statistics in late February," StatsCan said.

Canada's year-to-date trade deficit is the second highest on record at CAD28.1 billion, weakness that led the Bank of Canada to cut rates four times this year including in October before holding rates on Wednesday and signaling an extended pause. Governor Tiff Macklem says past stimulus is now enough to support the economy through the trade shock and keep inflation on target. Some investors say the Bank's next move may be a hike late next year if the economy does better than the Bank's projection for growth of about 1% in 2026. (See: MNI INTERVIEW: Supply Damage Supports BOC Hold- Dal's McNeil)

That view depends on whether U.S. President Donald Trump walks away from another North American trade deal in talks coming next year. Canada before the trade conflict sent three-quarters of its exports to the U.S. and officials have said perhaps a million jobs are at risk in a nation of about 40 million people.