Oil well with the pump jack in action. Alberta

Statistics Canada says the country’s merchandise trade deficit narrowed to $4.2 billion in January as higher oil prices helped exports rise faster than imports.

The result followed a revised deficit of $4.8 billion for December compared with an initial reading of a deficit of $4.6 billion for the final month of 2018.

Economists had expected a deficit of $3.5 billion for January, according to Thomson Reuters Eikon.

In a report, Royce Mendes, CIBC director and senior economist, described the narrowing trade deficit as “only modest,” and as a reading that “won’t do anything to inspire hopes for a rebound in the Canadian economy.”

Still, the monthly increase in exports was enough for National Bank to increase its forecast for first-quarter GDP to 0.96% from 0.83%. Statistics Canada said total exports rose 2.9% to $47.6 billion in January, the first increase since July 2018. Excluding energy products, exports rose 1.2% in January.

Meanwhile, total imports rose 1.5% to a record $51.8 billion in January, boosted by imports of aircraft and other transportation equipment and parts, which rose 52.6% to a record $2.7 billion due to higher imports of airliners from the United States.

Also released today, the payroll survey showed a “substantial” pickup in hiring in January, Mendes said, with non-farm payroll employees increasing by about 71,000 during the month on the back of broad-based gains across categories.

Overall, Mendes said today’s trade deficit and payroll data were a “mixed bag,” indicative of an economy that is “clearly slowing down, but also not on the precipice of a recession given the trends in employment.”

He added that Canada’s persistent trade deficit suggests that the Canadian dollar will likely need to weaken over the medium term.