OTTAWA: Canada's exports to the United States, its largest trading partner, rose sharply in January, leading to a surprise trade surplus, Statistics Canada said on Friday.

Canada's trade surplus with the rest of the world was C$1.41 billion ($1.11 billion) in January, the largest since July 2014. Analysts polled by Reuters had predicted a deficit of C$1.40 billion.

"In a sea of really bad news this is an island paradise. Everything is up," said Peter Hall, chief economist at Export Development Canada.

"This is very strongly driven by our top trading partner," Hall said, noting that demand from the United States will continue to be strong as its economy strengthens with increased vaccinations spurring a broader recovery from the COVID-19 pandemic.

The Canadian dollar clawed back some of its earlier decline after the data, trading 0.1% lower at 1.2678 to the greenback, or 78.88 US cents.

Canada's exports jumped 8.1% in January, led by a large sale of used aircraft to the United States. Even without the atypical aircraft sale, aggregate exports would have been up, with strong exports of gold bars, crude oil and lumber.

Excluding the swings of 2020, exports posted their largest increase since August 1995.

"The return to surplus in January ... is consistent with expectations that Canada's trade position will improve through 2021 amid returning global demand and firmer energy prices," said Ryan Brecht, a senior economist at Action Economics.

Canada's export of services rose slightly on an increase in transportation services, but they still remain 16.3% below the February 2020 level.

Imports edged up 0.9% in January, mostly on higher imports of energy products. Canada's December trade deficit was revised to C$1.98 billion.