After a stumble in February, it seems Canada's economy has rebounded vigorously, with the latest trade figures suggesting that firstquarter economic growth was significantly stronger than the already healthy 3.3-per-cent gain seen in the final quarter of 2010.
March "posted the kind of trade surplus that bulls on the Canadian economy were hoping for," said economist Emanuella Enenajor at CIBC World Markets, who estimates that first-quarter growth could be a robust four per cent.
Resurgent exports outpaced imports by $627 million, or nearly double the $356-million trade surplus racked up in February. February's surplus, in turn, was revised to more than 10 times the initially reported $33 million.
Better still, all this came in spite of the Canadian dollar's exceptional strength, a factor that had led several analysts to warn of weakening export performance. That could still show up, of course, but for the time being it's being overwhelmed by rising demand in the U.S. and other markets.
A significant chunk of the growing export earnings came from soaring oil prices, a factor that has weakened in recent days with the falling value of crude.
But even if oil remains more subdued, there's not much in these numbers to suggest that Canada's export picture will be seriously threatened.
Gains in March came from rising volumes of exports as well as rising prices, and it stretched across a wide spectrum of products, from oil to base metals to machinery and equipment. Even the beleaguered forestry-products industry registered a healthy bump in export sales.
"It's surprisingly good to see that exports are trending upward in the face of a strong loonie," said economist Sal Guatieri at BMO Capital Markets.
Over the past 12 months, Canadian exports have jumped by 14.7 per cent. They were propelled by a return to health in the U.S, our biggest market by far, as well as by growing demand in emerging economies such as China and India, which helped sustain a rebound in the prices of oil and other resource exports.
"Today's report is very good news, not only for the continued recovery of Canada's export sector, but also for GDP in the first half of the year," said economist Leslie Preston at the TD Bank.
But it's not all good news. While export earnings are growing at a rapid rate, the physical volume of exports has grown more slowly. Indeed, Canada's export volumes probably grew a little more slowly than import volumes in the first quarter.
Since it is these price-adjusted "real" trade figures that go into official calculations of GDP, this means that trade could actually subtract a little bit from total economic growth in the quarter.
This doesn't matter much in an environment where economic expansion is vigorous and where the disparity between import and export volumes is small. Still, it points to the possibility that even with expanding exports, trade could become a significant drag on growth if this disparity should widen.
But this concern shouldn't be exaggerated. Although we generally try to remove the impact of inflation from our economic-growth statistics for good reasons, there are times when it makes sense to include price hikes in our calculation of national wellbeing.
One example of this is when we think we're seeing a permanent shift in the price of something. In that case, this price shift isn't just economic noise; it's a change in the fundamentals.
Many would say that this is the case with resource products such as s oil, copper, nickel and potash, all of them essential ingredients for building a prosperous economy.
Canada exports all of these, and their prices have been driven up greatly over the past decade by their rising consumption in big emerging economies.
This demand won't let up any time soon.
Looked at in that perspective, the rising flow of cash we receive for resource products isn't a case of temporary inflation, but a long-lasting increase in the value of these exports.
It doesn't show up in economic growth numbers, but it's real money that drives real prosperity in this country, even if it's not given credit in official growth statistics.
