Canada’s trade surplus dropped by $1.3 billion in the first quarter to $4 billion, the lowest level in almost two years, Statistics Canada reported today.

Rising imports helped push the surplus down for the third consecutive quarter. However, in the capital and financial account, growth in Canadian-owned foreign assets outpaced international liabilities for a sixth consecutive quarter.

The surplus on trade in goods fell $1.3 billion to $13.2 billion in the quarter. Imports increased $2.5 billion, while exports rebounded after a large drop in the fourth quarter.

Imports of machinery and equipment products and industrial goods rose in the quarter. Imports of passenger cars and trucks also increased but this was partially offset by lower imports of motor vehicle parts.

Exports rose by $1.2 billion with the largest increase in industrial goods. For the third quarter in a row, the exports of automotive products decreased. Exports of crude petroleum products also dropped significantly.

The deficit on investment income decreased $0.4 billion to $5.7 billion. This marked only the second time in 11 years that it was below $6.0 billion.

The deficit on trade in services rose by $200 million to $3.2 billion.

Canadian direct investment abroad slowed in the quarter, but purchases of foreign securities remained strong.

Foreign direct investors, mostly Americans, made their highest quarterly investment in three years. Their first quarter total of $9.4 billion was higher than the annual totals for the last two years.

Foreign purchases of Canadian securities slowed sharply.