-- A surge in oil exports, led by higher prices, and added glitter in the gold trade, saw Canada's trade balance flip unexpectedly to a surplus in March, said CIBC after Tuesday's data.
However, the improvement in export volumes was much more muted, and for the quarter as a whole, net trade still appears to be a slight drag on Q1 gross domestic product, noted the bank.
The $1.8 billion goods trade surplus in March was reported compared with a $5.1 billion deficit in the prior month and consensus expectations for a $2.5 billion shortfall, pointed out CIBC.
Markets continued to react more to movements in oil prices rather than the economic data, despite the large headline beat, stated the bank.
While a trade surplus in March was unexpected, it was mainly driven by price fluctuations rather than any signs that real economic activity was stronger than anticipated, added CIBC.
Combined with signs last week that higher gasoline prices may already be having a negative impact on consumer spending, the bank continues to expect only modest GDP growth this year and little evidence that slack within the economy is being absorbed.
That should see the Bank of Canada look through a near-term spike in headline inflation, keeping interest rates on hold this year, according to CIBC.