Canada’s current account surplus rose to $5.9 billion in the first quarter, or $23.6 billion annualized.

” After a yearlong diet, Canada’s current account is starting to put back on some of its previous weight,” says CIBC World Markets. “While there are risks that a surge in stateside demand may prove short-lived, the current account looks to remain on relatively sturdy ground over the balance of the year, providing another leg of support for the Canadian dollar, which is benefiting more directly from pre-emptive Bank of Canada rate tightening.”

BMO Nesbitt Burns notes that the prior quarter’s $13.0 billion surplus, which had been a disappointing result at the time, was revised up sharply to $17.7 billion. “According to Statistics Canada, exports of energy products, particularly natural gas, accounted for nearly the entire increase in the goods surplus. Much of these goods were destined to the United States – Canada’s trade surplus with the U.S. expanded for the first time in a year. Also providing some support was a slight narrowing in the deficit on investment income.”

RBC Financial says that the first notable increase in the current account since the first quarter of 2001 unleashes “what is likely to be sustained support for the Canadian dollar for some time to come”.

“While nowhere near the inflated levels of early last year, Canada’s current account has emerged from a U.S. economic downturn in reasonable shape,” says CIBC. “Concerns over the strength of a U.S. recovery could cap the upside for the merchandise trade surplus, as could healthy domestic demand which draws in imports. Still, we look for the current account to average a little better than $20 billion over the balance of the year, with prospects expected to brighten as 2003 approaches.”