By Paul Vieira 

OTTAWA -- Canada posted its biggest trade surplus with the U.S. in nearly a decade for July on higher prices for crude-oil exports and a solid jump in sales to its fast-growing southern neighbor.

The country ran a nearly balanced trade account in merchandise goods, recording a small trade deficit of 114 million Canadian dollars ($86 million) on a seasonally adjusted basis, according to Statistics Canada on Wednesday, versus a revised C$743 million deficit the previous month. The July report surpassed market expectations for a C$1 billion trade deficit, according to economists at Royal Bank of Canada.

The U.S. also reported trade data Wednesday. The Commerce Department said the trade shortfall in goods and services widened by 9.5% from June to a seasonally adjusted $50.08 billion in July, as exports sank 1% from June, while imports rose 0.9%.

Canada's trade deficit with the rest of the world in July was the smallest since December 2016, when Canada last posted a trade surplus. Canada's trade surplus in goods with the U.S. widened to C$5.35 billion, or the largest in nearly a decade. Exports to the U.S. rose 3.3% in July from June, and 16% from a year earlier.

The U.S. and Canada resume talks Wednesday in Washington on a revised North American Free Trade Agreement, with a late September deadline looming. The focus will be on Ottawa and Washington bridging differences to keep the U.S., Canada and Mexico signatories to an update of the quarter-century-old treaty. Nearly three-quarters of all Canadian exports are U.S. bound, and an analysis from the Bank of International Settlements indicated Canada has to most to lose from Nafta's demise.

"Risks around Canada's trade relationship with the U.S. remain," said Nathan Janzen, economist at Royal Bank of Canada. Still, he said, it appears Canadian exports "are finally starting to get at least a modest lift from stronger global trade flows and an improved U.S. industrial sector."

In the quarter ended June 20, Canadian economic output rose at a 2.9% annualized rate from the previous quarter, powered by one of the strongest export gains this decade.

Canadian exports in July rose 0.8% from the previous month to a record C$51.27 billion. Sales abroad of energy products climbed 5% to C$10.28 billion, or the highest level in nearly four years, and auto-related shipments rose 3.4%. The data agency largely attributed the overall rise in exports to higher crude-oil prices, as they rose 9.4% in July. Nonenergy exports fell 0.2% in July. On a volume, or price-adjusted, basis, exports declined 0.8%.

Imports fell 0.4% from June, due to weaker demand for foreign aircraft, metal ores and concentrates. Also weighing on imports were Canadian tariffs on U.S. steel, imposed in July in retaliation for U.S. tariffs on Canadian metals imposed on national-security grounds, the data agency said. Steel imports from the U.S. fell nearly 40% in July, more than offsetting a roughly 33% climb in June when Canada warned retaliatory levies were coming.

On a volume basis, imports fell 1.1% from June, as prices from goods abroad rose 0.7%.

The Canadian trade data incorporates the trade of merchandise goods, and doesn't include the sale and purchase of services.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

September 05, 2018 10:17 ET (14:17 GMT)