Canada's goods trade surplus widened more than expected in September, reaching C$2.0 billion, the largest surplus since June 2022. The surplus was almost twice as much as the C$1.1 billion consensus in an Econoday survey. Imports rose 1.0 percent and exports 2.7 percent. The surplus for August was revised up to C$0.9 billion from C$0.7 billion.

Exports increased in 7 of 11 sections in September, led by a 10.6 percent advance in energy. The energy increase represented more than a quarter of total exports, the largest share since October 2022, led by crude oil. Metal ores and non-metallic minerals increased 5.7 percent, and aircraft and other transportation equipment and parts 8.6 percent. By contrast, metal and non-metallic mineral products fell 10.7 percent, led by a 21.7 percent drop in unwrought gold, silver, and platinum group metals. There were lower transfers of gold assets within the banking sector in September. Price effects were significant on the month, as exports increased just 0.4 percent in volume.

On the import front, 6 categories declined and 5 increased, with volumes up 1.7 percent. Imports of motor vehicles and parts rose 5.8 percent in September, and consumer goods rose 1.3 percent. Industrial machinery, equipment and parts decreased 3.6 percent after rising 7.1 percent in August.

Regionally, the trade surplus with the United States widened to C$11.7 billion from C$11.0 billion. Canada's merchandise trade deficit with countries other than the United States narrowed to C$9.6 billion in September from $10.1 billion in August.

Services exports edged up 0.1 percent in September while imports were virtually unchanged. When combining both goods and services, Canada's trade balance swung into a surplus of C$0.5 billion in September from a deficit of C$0.6 billion in August.

September's trade balance is seen in surplus of C$1.1 billion versus August's surplus of C$0.7 billion.

The merchandise trade balance measures the difference between imports and exports of goods. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade and can offer a guide to an economy's competitiveness. Nominal data are supplied with regards to principal trading partners and product classification.

Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect currency values in foreign exchange markets. This is particularly true for Canada which relies on exports and particularly those to the U.S. for growth. It should be noted that this report focuses solely on goods trade - it leaves services trade for the quarterly national accounts and balance of payments reports.

Imports indicate demand for foreign goods while exports show the demand for Canadian goods in the U.S. and elsewhere. The Canadian dollar is particularly sensitive to changes in its trade balance with the U.S. For the most part, Canada's trade balance is in surplus thanks to its exports to the U.S. Both the nominal export and import values are split into volume (real) and price components. This permits trade data to be analyzed for both changes in trade patterns as well as changing prices. This has been particularly important of late given energy price volatility and the impact on Canada's merchandise shipments. A word of caution -- the data are subject to large monthly revisions. Therefore, it can be misleading to form opinions on the basis of one month's data.

The bond market is sensitive to the risk of importing inflation. This report gives a breakdown of trade with major countries so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country.