Canada’s merchandise trade report for September is proof the economy has bounced back, but economists cautioned not to get too excited about the latest figures.

Exports rose 4.7% to $33.7 billion, and imports also grew a similar amount to about $28 billion, producing a $5.6-billion surplus, which was bigger than the $5 billion expected by the market.

But economists noted the bounce really came off August’s blackout-hampered levels. “Wait a minute before getting overly excited about this morning’s merchandise trade data – there was much less to cheer about than it appears at first glance,” said TD Bank senior economist Marc Lévesque.

“Put the two months together, and the picture that emerges is one of an export sector that is still struggling with this year1s sharp appreciation of the Canadian dollar.”

“Looking ahead, Canada’s export sector will continue to wrestle with the loonie1s strength, but there will be some important offsets as well,” Lévesque said. “Notably, the U.S. economy is truly taking flight, which obviously bodes well for Canada1s exports. And, rising commodity prices have offset the better part of the drag on resource-based industries. In sum, don’t expect miracles on Canada1s export front over the next few months, but a full-blown calamity it is not.”

Economists noted most of the export increase was centred in the automotive sector. Although all other categories also saw some gains after the blackout in August. Import gains were also led by autos and crude petroleum products.

RBC Financial Group economist Carl Gomez says, overall, for the third quarter, real exports have fallen at a 10.6% annualized rate while imports have also fallen a corresponding 4.3%. “As such, third quarter national accounts data will likely show that real net exports will once again be a drag on growth in the third quarter, a trend which has persisted over the last few quarters,” he said.
“Nevertheless, the monthly trend does suggest that an improving trade picture is emerging in the fourth quarter, likely inspired by better demand prospects coming from south of the border.”

Warren Lovely of CIBC World markets said that fourth-quarter growth will see a notable pick-up (thanks to comparisons to Q3, which was hobbled by economic shocks and the increased buoyancy of American demand), but added, “Exporters continue to face stiff headwinds in the form of an appreciating Canadian dollar. Real trade flows may have been in decline during the quarter, but in nominal terms the goods surplus saw a $4-billion annualized improvement over Q2 levels, bolstering an already-sturdy current account surplus.”

. Sherry Cooper, chief economist for BMO Nesbitt Burns Inc. said the solid trade numbers “are proof that the Canadian economy snapped back big-time in September. As well, the strength of the trade balance is impressive in the face of the soaring Canadian dollar. Overall, both of those conclusions are positive stories for the loonie – as if it needs more help.”