Posted on March 31, 2011
Economy expands 0.5 per cent in January
Financial Post March 31, 2011 7:17 AM
OTTAWA — Canada's economy continued its strong pace of growth at the start of the year, led by the manufacturing sector, and matching economists' forecasts.
Statistics Canada said Thursday the country's gross domestic product —_the broadest measure of economic performance —_grew 0.5 per cent in January.
"Growth was driven by manufacturing and, to a lesser extent, by transportation and wholesale trade," the federal agency said. "The finance and insurance sector, construction and real estate also increased. Mining and oil and gas extraction as well as retail trade decreased."
Most economists had expected GDP growth of around 0.5 per cent for the month, the same pace as December. In the fourth quarter of 2010, the economy expanded at an annualized 3.3 per cent.
BMO Capital Markets economist Robert Kavcic said the January pace of growth "would put three-month annualized growth at nearly six per cent, and could leave 2011 Q1 on track for growth of four per cent."
"That would be well above the Bank of Canada's latest call (of 2.5 per cent), which itself follows an upside surprise in 2010 Q4."
Avery Shenfeld, chief economist at CIBC, said the GDP report "had no major surprises, with strength in manufacturing, wholesaling and finance, offsetting a dip in retail."
He said the strong performance is pointing to interest rate hikes by the Bank of Canada towards the middle of the year. "Our call is July, with four quarter point hikes in total for 2011," he said.
Statistics Canada said the manufacturing sector grew 2.8 per cent in January, following a 0.8 per cent advance the previous month.
"Although growth was broadly based in both durable and non-durable goods, manufacturers of fabricated metal products and of motor vehicles and associated parts recorded the largest increases," the agency said.
The transportation and warehousing sector rose 1.2 per cent, while wholesale trade gained 0.7 per cent.
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