Canada Swings to C$8.8 Billion Current-Account Surplus, First Since 2022

Canada returned to a current-account surplus in the second quarter of 2026, posting a seasonally adjusted C$8.8 billion balance after a C$8.3 billion deficit in the first quarter. It was the country’s first current-account surplus since the second quarter of 2022, when the balance was C$3.5 billion, and the largest since the fourth quarter of 2005, when it reached C$12.5 billion.

Most of the reversal came from merchandise trade. Canada’s goods balance swung from a C$6.4 billion deficit in the first quarter to a C$12.2 billion surplus in the second, the largest goods surplus since the third quarter of 2008. Exports increased much faster than imports, with energy products accounting for much of the gain.

Energy-led exports reverse the goods balance

Statistics Canada said in its August 27 balance-of-payments release that goods exports rose 13.1% from the previous quarter to a record C$232.1 billion. That total was well above the earlier quarterly record of C$209.0 billion set in the first quarter of 2025.

Energy exports were the biggest contributor, rising 27.4%. Crude oil and bitumen exports reached a record C$44.8 billion, helping lift total energy-product exports to a record C$60.6 billion. Statistics Canada linked the increase in part to higher prices amid international production and supply uncertainty related to the conflict in Iran.

Motor vehicles and parts also rebounded, with exports up 19.3% as Canadian auto production increased. Even after that rebound, the value of vehicle and parts exports remained below the quarterly average recorded in 2023 and 2024, showing that the sector had not fully returned to those earlier levels.

Imports also reached a record, rising 3.9% to C$220.0 billion, but their increase was much smaller than the jump in exports. Chemical-product imports rose 20.2%, electronic and electrical equipment and parts increased 11.2%, and motor vehicles and parts gained 7.6%. Imports of metal and non-metallic mineral products fell 13.6%, partly offsetting those increases.

A goods swing of that size explains most of the current-account turnaround. A current account is broader than the merchandise balance, covering goods, services, compensation of employees, investment income and secondary income. In the second quarter, however, the change in goods trade was large enough to dominate movements elsewhere in the account.

Services and investment income add little to the improvement

Canada’s services balance was close to flat in the second quarter. The services surplus narrowed to C$26.3 million from C$472.1 million in the first quarter as imports of services increased 1.7% to C$62.0 billion and exports rose 1.0% to roughly the same level.

Commercial services contributed to growth on both sides. Imports of commercial services rose 2.8% to C$35.1 billion, led in part by financial and management services. Exports increased 1.7% to C$37.2 billion, with gains in management services, advertising, royalties and research and development services. The travel-services surplus also narrowed, to C$2.4 billion from C$2.6 billion, as education-related travel exports declined and Canadians’ personal travel imports increased.

Investment income provided only a small positive balance. The surplus narrowed for a third consecutive quarter, falling to C$0.5 billion from C$1.0 billion. Statistics Canada said the decline largely reflected a wider portfolio-investment income deficit as interest payments to non-resident holders of Canadian bonds increased.

Together, the services and investment-income figures show that the C$8.8 billion current-account surplus did not reflect an improvement across every component. The quarter was chiefly a goods-export story, especially an energy-export story, rather than a simultaneous strengthening in services and cross-border investment income.

Foreign demand for Canadian government bonds hits a record

Statistics Canada also reported unusually large financial-account flows in the quarter. These figures are not seasonally adjusted, so they should be read separately from the seasonally adjusted current-account balance. Foreign investors increased their holdings of Canadian securities by C$100.6 billion, including a record C$110.2 billion of Canadian debt securities.

Government bonds were at the center of that buying. Foreign acquisitions of Canadian government bonds totaled a record C$80.8 billion. At the same time, foreign investors reduced their holdings of Canadian shares by C$9.6 billion, marking a second consecutive quarter of divestment from Canadian equities.

Canadian investors added C$45.6 billion of foreign securities. Purchases of foreign shares totaled C$35.5 billion, led by C$37.8 billion of U.S. equities, while investors added C$10.0 billion of foreign debt securities. Canadian holdings of U.S. government bonds fell by C$14.4 billion for a third straight quarter.

Portfolio investment therefore produced a net inflow of C$55.1 billion, the largest since the first quarter of 2022. Direct investment also generated a net inflow: Canadian direct investment abroad slowed to C$17.1 billion from C$43.6 billion, while foreign direct investment in Canada rose to C$25.9 billion from C$18.8 billion.

Within direct investment, the composition also shifted. Reinvested earnings accounted for C$24.5 billion of Canadian direct investment abroad, while merger and acquisition activity slowed to C$2.1 billion from C$9.7 billion in the first quarter. For foreign direct investment in Canada, reinvested earnings contributed C$12.4 billion, while merger and acquisition activity fell to C$2.0 billion from C$12.1 billion. Manufacturing received C$7.0 billion and finance and insurance C$6.6 billion, together accounting for more than half of foreign direct investment into Canada during the quarter.

Statistics Canada’s next quarterly balance-of-payments release is scheduled for November 27. It will provide the next full-quarter reading on whether the goods-export surge and energy strength continued into the third quarter.