Canada’s trade deficit unexpectedly widened to a record in March as a surge in automobile imports outpaced a rebound for the nation’s exporters.

The merchandise trade deficit widened to $4.14 billion from $2.93 billion a month earlier, Statistics Canada reported Thursday in Ottawa. Economists predicted the March figure would narrow to $2.25 billion.

The figures represent a mixed picture for the trade sector. Policy makers will be reassured by a rise in exports and signs of dissipating railway bottlenecks, while the jump in imports implies trade acted as a major drag on first-quarter growth.

Imports rose 6 per cent to a record $51.7 billion in March, while exports jumped 3.7 per cent to $47.6 billion. In volume terms, imports rose 5.3 per cent, which was the biggest increase since 2009. Exports were up 3 per cent, the biggest one month gain since July 2016.

Purchases of cars and consumer goods were responsible for the jump in imports. The auto sector recorded an 8.3 per cent jump in imports, the strongest since 2011. Consumer goods imports jumped 7.7 per cent to a record high.

Exports also recorded strong gains in March, after weakness in the previous three months, led by aircraft and agriculture. Farming-related products were up 14.7 per cent, offsetting a sharp decline in February that coincided with rail disruptions. Wheat exports were up 52 per cent.

"Canada’s deficit now stands at a record level on the back of what appears to be strengthening domestic demand. While the import boom is by itself a headwind to GDP, the associated implications for domestic demand suggest that the economy maintained healthy momentum in March," CIBC Senior Economist Royce Mendes wrote in a note Thursday.

Other Highlights: 

  • For the first quarter, imports rose 2.1 per cent, with exports up 1 per cent and the country running a record trade deficit of $9.1 billion. In volume terms, imports rose 1.5 per cent in the quarter, while exports grew 0.3 per cent
  • Imports of industrial machinery and equipment -- a gauge of business investment -- rose a solid 3.2 per cent, but the increase was mostly price related. In volume terms, these imports were up 0.7 per cent, the largest in three months
  • Electronic-related imports -- another indicator of business sentiment -- rose 4.4 per cent in March, and were up 4.2 per cent in volume terms, the biggest gain in four months

--With assistance from Erik Hertzberg, files from BNN Bloomberg