Canada's trade deficit shrank slightly to $4.25 billion in January, the second highest on record, as low crude prices continued to eat into the value of exports, Statistics Canada said on Wednesday.
Analysts in a Reuters poll had forecast a shortfall of C$3.50 billion. Statscan revised December's deficit to C$4.82 billion from an initial C$4.59 billion.
Exports grew 2.9 percent to $47.58 billion – the first increase since July 2018 – as the value of oil shipments jumped by 36.5 percent due to higher prices. Even so, crude export prices remained 40.1 percent below their July peak.
Export Development Canada chief economist, Peter Hall, said he was "still looking at the overall picture with some concern."
Hall noted, though, that exports of industrial machinery, equipment and parts climbed 4.7 percent on the month while shipments of electronic and electrical equipment and parts were up by 1.9 percent.
"To me, they are a bellwether of underlying strength in the U.S. economy," he said in a telephone interview.
Exports of other crop products sank 25.4 percent, as soybean shipments to China slipped after a record year in 2018.
Imports gained 1.5 percent to a record $51.82 billion, as imports of aircraft soared six-fold from December, reflecting the arrival of airliners from the United States.
The Canadian dollar extended its decline on the news, slipping to $1.3427 to the U.S. dollar, or 74.48 U.S. cents.
Canada sent 71.5 percent of all its goods exports to the United States in January. Exports to the United States rose by 1.1 percent while imports edged up by 1.8 percent and as a result, the bilateral trade surplus shrank to $1.56 billion from $1.77 billion in December.
The Bank of Canada, which has put interest rate hikes on hold until data shows the economy recovering from a slump caused in part by low oil prices, is widely expected to sit on the sidelines at its next policy announcement on April 24.
"Over the first quarter as a whole, net trade is on track to weigh on GDP growth for the first time in a year," said Stephen Brown, senior Canada economist at Capital Economics.
Publication of the January data was delayed from March 7 due to a partial U.S. government shutdown.