A boost in manufacturing, mining, and construction helped the Canadian economy start with the year with a bang, the latest economic report from Statistics Canada shows.
The gross domestic product, a measure of all the goods and services produced, rose by 0.6 per cent in January, according to the data released Wednesday.
It was the biggest one-month increase since December, 2006, and is the fifth-consecutive monthly gain. Economists had been expecting GDP to rise by 0.5 per cent.
While the report does confirm that the Canadian economy has recovered from the depths of the recession, economists are still not convinced it will be enough to make the Bank of Canada raise interest rates ahead of schedule.
Manufacturing increased 1.9 per cent in January, with 17 of the 21 major groups making gains. That follows a 1.2 per cent advance in December. Motor vehicle production declined by 2.4 per cent, but there were increases in metal products, chemicals and plastics and rubber products.
The construction sector advanced 1.7 per cent, with a 4 per cent increase in residential construction and a 1 per cent rise in engineering and repair work. Non-residential building construction bucked the trend, falling off a slight 0.5 per cent.
Mining and oil-and-gas extraction went up 0.9 per cent, and the financial and insurance sector gained 0.6 per cent, largely on an increase in the volume of trading in the stock market.
On the negative side, there was a 6.7 per cent decline in the output of real estate agents as brokers. StatsCan noted that sales of existing homes fell significantly in several parts of the country.
The positive report sent many economists back to the drawing board to revise their forecasts for the year. 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 1/2 per cent even if the next two months come in at just up 0.2 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.”
“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.”
