Canadian economy grows faster than expected in January
OTTAWA – The stalwart Canadian economy marched doggedly forward in January, growing faster than anticipated thanks to a healthy boost from a manufacturing sector that appeared to be in full rebound from the recession.
The month’s 0.6 per cent rise in real gross domestic product, reported today by Statistics Canada, was the biggest one-month lift in more than two years and just ahead of an economist consensus forecast of 0.5 per cent.
“The Canadian recovery is becoming more fully entrenched and is showing surprising strength, with the goods-producing sector in full rebound mode,” Douglas Porter, deputy chief economist for BMO Capital Markets, wrote in a note to clients.
“Importantly, the recovery looks to be broadening beyond the initial push in housing and consumer spending, as manufacturing has advanced for five straight months.”
The solid improvement will likely put more pressure on the Bank of Canada to raise interest rates in the next couple of months from their historic lows of 0.25 per cent.
Goods-producing industries grew 1.3 per cent, largely on the strength of manufacturing and construction, the agency said. After a 1.2 per cent gain in December, manufacturing was up 1.9 per cent in January, with 17 of 21 major groups advancing.
The construction sector advanced 1.7 per cent, on a four per cent increase in residential construction and a one per cent rise in engineering and repair work. Non-residential building construction bucked the trend, falling off a slight 0.5 per cent.
“These are unambiguously strong results, with GDP now rising at a whopping 6.9 per cent annual pace over the November-to-January period,” Porter said.
“And, the economy has already recouped more than half of its recession losses, with GDP now up by 2.7 per cent from last May’s low.”
The loonie rose following the announcement, moving up 0.43 cents to 98.52 cents US in morning trading.
Mining and oil-and-gas extraction also increased in January.
The production of services advanced 0.4 per cent, led by wholesale trade.
Retail trade, the finance and insurance sector, transportation and the public sector also rose.
Meanwhile, the output of real estate agents and brokers, some tourism-related industries as well as agriculture and forestry retreated.
The volume of wholesaling activity increased 2.9 per cent with all wholesaling trade groups posting gains except apparel and alcohol and tobacco.
Value added in the retail trade sector rose 0.8 per cent in January.
Significant increases were registered in building and outdoor home supplies stores, home furnishings stores as well as food and beverage stores. Declines were recorded at new- and used-car dealers and at gasoline stations.
Porter added that early statistics for the month of February also look promising, with the gain of 60,000 full-time jobs, housing starts up six per cent and auto sales at their highest level in almost two years.
“Given today’s results, and the fact that February is shaping up well, first-quarter GDP growth looks set to easily surpass our recently revised call of a gain of 4.7 per cent (let alone the Bank of Canada’s latest estimate of 3.5 per cent), with growth on track for 5 ½ per cent even if the next two months come in at just up 0.2 per cent.”
The Canadian Press http://news.therecord.com/Business/article/691423