UPDATE 1-Canada's August trade deficit narrows as imports fall

(Adds details)

* Canada exports down 0.1 percent, exports fall 3.1 percent * Canada surplus with the United States hits four-month high

OTTAWA, Oct 11 (Reuters) - Canada's trade deficit fell more than expected in August, dropping to C$1.32 billion ($1.35 billion), as imports declined by 3.1 percent, according to Statistics Canada data on Thursday

The deficit, the fifth in a row, was smaller than the C$1.90 billion shortfall predicted by market analysts and down from a record C$2.53 billion in July.

Exports dropped by 0.1 percent to C$37.47 billion, indicating that Canadian exporters are still finding it tough to cope with weak markets and a strong Canadian dollar. A 0.7 percent decrease in prices offset a 0.7 percent increase in volumes.

The value of imports fell to C$38.79 billion on widespread declines in every sector except energy while volumes were down 2.2 percent. It was the largest month-on-month fall in imports since the 4.4 percent drop recorded in May 2009.

Exports of industrial goods fell by 6.1 percent while shipments of energy rose by 5.5 percent.

Exports to the United States -- which took 73.8 percent of all Canadian exports in August -- increased by 1.4 percent while imports fell by 4.3 percent. As a result, Canada's surplus with the United States grew to C$3.48 billion from C$2.02 billion in July, the highest level since May when the surplus was C$4.61 billion.

($1=$0.98 Canadian)

(Reporting by David Ljunggren; Editing by Leslie Adler)

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Keywords: CANADA ECONOMY/TRADE