Canada's merchandise exports hit a record annual high in 2006, despite the first decline in exports to the United States in three years. However, for the first time in 18 years, the country registered an auto industry trade deficit.
Imports boomed even faster than exports, shearing $11 billion from the country's trade surplus.
Canadian companies exported nearly $458.2 billion worth of merchandise last year, up 1.1 per cent from 2005, Statistics Canada said.
However, imports rose nearly four times as fast (up 4.2 per cent) to $404.5 billion, which was also a record high.
That means the country's merchandise trade surplus fell by more than $11.2 billion to $53.6 billion, its lowest level since 1999.
Exports to the U.S. accounted for 79 per cent of all sales, down from 81 per cent in 2005 because of weakness in autos and forestry products. The $96.5-billion trade surplus with the U.S. was the smallest since 2003.
Analysts said the trade data, and the unexpected jump in employment in January, suggest the Bank of Canada was on the mark with its prediction that the economy would rebound after sagging late last year.
"The surge in employment in January (marking the fourth consecutive month of strong gains) and more favourable trade data are encouraging signs that the economy will transition out of the recent weak patch,'' said Dawn Desjardins of the Royal Bank.
She said the central bank is unlikely to tinker with interest rates for a while.
"Given the mixed signals on the economy, we expect the Bank of Canada will refrain from making any adjustments to policy at this stage.'' For December alone, imports from all countries surged 3.6 per cent to a new monthly peak of $35.4 billion, the third monthly gain in a row.
Exports that month rose 3.8 per cent to $40.4 billion, just short of the monthly high recorded a year earlier when energy prices peaked after hurricanes devastated the U.S. Gulf Coast.
Automobiles and energy led December's gains in both exports and imports.
Shipments of new car and truck models to the rest of the North American auto market pushed up exports. Strong auto sales in Canada up to the very end of 2006 meant strong auto imports for December.
For 2006 as a whole, Canada registered an auto industry trade deficit.
"It is no coincidence that Canada became a net importer in the auto industry last year at the same time we face unprecedented job cuts at North American-based auto manufacturers,'' CAW president Buzz Hargrove said.
Statistics Canada revealed that the country's auto industry registered a $1.2-billion trade deficit for 2006, the first such deficit since 1988. Mounting imports, combined with declining exports, have eroded the Canadian automotive sector, said Hargrove.
Douglas Porter of BMO Nesbitt Burns said the trade figures indicate a boost for overall GDP at year's end, although after the poor showing in October and November, there would have to be a strong December figure just to bring fourth-quarter GDP growth to one per cent.
Overall, export receipts were up for agricultural products, machinery and equipment, and industrial goods last year.
Imports rose in all major sectors in 2006.
Energy exports last year were stable at 2005's high levels, but the picture was mixed. Crude petroleum exporters had a strong year, but that was offset by falling prices for natural gas exporters.
Turning to automotive vehicles, in 1999, Canada's auto industry registered a $14.3- billion trade surplus, said Hargrove. That's when Canada was the world's fourth-largest auto assembler. It fell to eighth place in 2005 and if trends continue will likely be tenth at the end of 2007.
Automotive industry imports from Japan increased 15 per cent last year resulting in a record deficit, exceeding $6 billion for the first time.