Canada’s merchandise exports and imports posted increases in February.

Exports rose to $33.7 billion worth of goods, up 2.7% from January’s revised level, the largest monthly rate of growth since May 2000.

Merchandise imports, however, rose 5.1% from January, almost twice the pace of exports, to $29.1 billion. It was the strongest monthly rate of growth in imports since August 1998.

As a result, Canada’s trade surplus fell for the first time in four months to just over $4.5 billion in February from nearly $5.1 billion in January.

That growth in imports outpaced that of exports, suggests that Canada’s domestic economy is outperforming its major trading partners, say economists at Bank of Montreal. “Imports jumped 5.1% in February, reflecting buoyant domestic demand. The gain was led by a surge in imports of automotive parts, as several plants reopened after shutting down for several weeks in January. Imports of consumer products also rose briskly. Exports rose 2.7% in February, reflecting a pickup in the global economy.”

“A recovery in the U.S. manufacturing sector clearly contributed to February’s solid results, but enhanced two-way trade with Canada’s largest trading partner was only half the story,” comments CIBC World Markets. “Trade with non-US regions advanced mightily, with shipments to and from the EU and Japan particularly healthy. Meanwhile, falling prices for both exports and imports meant real trade volumes were even more impressive than the headline figures would suggest. Real exports rose 2.9% in February, providing an obvious boost to first quarter growth.”

BMO says that the February trade report highlights an upside risk to its current estimate of 5% GDP growth in the first quarter. “On a volume basis, the merchandise trade surplus is up $6.7 billion annualized in February/January from the fourth quarter, suggesting trade could add more than 2 percentage points to growth in the quarter.”

“Today’s trade report, showing a rising tide of exports and imports, aligns itself with evidence elsewhere that the global economic activity is on the upswing,” says CIBC. “Through the first two months of the quarter, Q1 real exports have enjoyed a double-digit annualized advance versus the final quarter of 2001, meaning that exports will be a contributor to growth for the first time in six quarters.”