Canada’s current account surplus grew in the third quarter to $20.4 billion, in line with expectations.

BMO Nesbitt Burns says that the increase was led by a higher surplus for merchandise trade. “This is a healthy level, close to 2% of GDP, but down from last year’s record high of $30 billion.”

“Canada’s current account has been proving largely impervious to broad North American economic developments of late. While economic growth rates bounce around, the current account continues to churn out a serious of relatively stable, and very healthy, surpluses,” says CIBC World Markets.

Canadian direct investment abroad continues to grow, rising $16.8 billion to $51.2 billion in the quarter. However, Canadian demand for foreign securities declined. Canadians purchases of foreign securities marked the lowest quarterly investment outflow in over three years. Nesbitt says that the decline was due to the lack of investment in foreign equities, the lowest level in five years.

“While the final tally will end up notably shy of the levels posted in the first two years of the decade, a $20 billion current account is an impressive achievement given the relative economic softness exhibited south of the border,” says CIBC. “We‚d expect an easing in stateside factory demand to limit the near-term prospects for merchandise exports and by extension the current account, with a material improvement not likely until the latter stages of 2003.”

“The current account surplus remains at a very healthy level and should be positive for the loonie,” concludes Nesbitt. “The surplus should continue to remain at healthy levels of around $20 billion over the next year as the U.S. economy recovers.”