Canada's trade deficit with the rest of the world shrank to $1.7 billion in October as exports of copper and precious metals hit record highs, Statistics Canada said Friday.

Analysts had expected the trade deficit to come in at $2.1 billion. The deficit had been $2.3 billion in September.

Exports rose 3.1 per cent to $33.8 billion, with surging export shipments of metals and alloys responsible for the narrowing trade deficit.

Metals and alloy shipments in October were up 17.6 per cent from the previous month, led by a record export of $1.6 billion of precious metals. Exports of metal ores jumped 48.9 per cent, due largely to record copper exports. Shipments of nickel also grew.

Exports of automotive products and agricultural and fishing products also rose, while the dollar value of energy exports slipped 2.4 per cent because of lower natural gas prices.

Trade surplus with U.S. at 18-year low

Imports increased 1.2 per cent in October to $35.5 billion, led by growing imports of coal and gasoline, automotive products and other consumer goods. Imports of industrial goods and materials fell.

Exports to the U.S. edged up 0.4 per cent, while Canada imported 1.7 per cent more from the U.S.

As a result, Canada's trade surplus with the United States fell by $300 million to $1.1 billion in October. Statistics Canada said this was the smallest monthly trade surplus with the United States since September 1992.

"Going into 2011, the likelihood that the U.S. Bush tax cuts will be extended, in combination with additional quantitative easing in the U.S., has us feeling a bit more upbeat about the Canadian export outlook," said TD economist Diana Petramala in a morning commentary.

"As such, we believe that 2011 will be the first year in a while that net trade will contirbute positively to economic growth," she said.

Exports to countries other than the U.S. jumped 10.1 per cent to $10.1 billion in October — their highest level since November 2008.

While the U.S. is still the ultimate destination of most of Canada's exports, its share of that market is shrinking. In October, the U.S. took only 70 per cent of Canada's exports — a 28-year low.