Higher exports to the EU helped narrow Canada's trade deficit to $927 million in September, Statistics Canada said Friday. (Jason R Zalasky/Associated Press)

Canada's exports were 3.5 per cent higher in September, narrowing the trade deficit to $927 million from $2 billion.

Statistics Canada says exports rose by $1 billion to $30.3 billion in September, as volumes increased 4.5 per cent. Imports were largely unchanged, edging down 0.1 per cent to $31.2 billion.

Exports have been on a downward trend since July 2008 and reached a low point in May 2009 before increasing in three of the past four months.

Automotive products, industrial goods and materials, and machinery and equipment were the main sources of growth for exports. Energy products mitigated the gains.

Higher exports to the European Union were largely responsible for the overall increase in exports.

"The big story in this report was Canada’s diversification away from the United States," BMO economist Benjamin Reitzes said.

Exports to the EU and other OECD countries jumped 34 per cent and 15 per cent respectively, he noted. "As U.S. consumption is likely to lag the global recovery, a shift towards other markets will be a key to Canadian exporters’ success," he said.

Exports to the United States increased 0.5 per cent while imports grew 1.7 per cent. As a result, Canada's trade surplus with its largest trading partner shrank to $2.1 billion in September from $2.3 billion in August.

"With the U.S. still Canada’s largest customer, trade deficits are likely to persist," Reitzes said.