The Canadian economy has caught fire much quicker than expected, with home building, hiring and even car buying surpassing the most optimistic forecasts.

Auto sales, housing starts and job creation all came in higher than forecast in the past month, and Canada’s trade surplus reached its best level in a year in January. On Friday, the federal government said it recorded its smallest monthly deficit in more than a year in January, thanks to rising tax revenue due to the strengthening economy.

 “We’ve seen much more of a V-shaped recovery than the U-shape that I was expecting,” said Mike Barry, chief financial officer at Vecima Networks Inc., a Victoria-based company that makes telecommunications hardware, much of it for export.

While the U.S. economy continues to recover slowly, Canada is moving ahead at a faster clip. Indicators here “have been on the fast track, suddenly, almost since the first day of March,” said Douglas Porter, deputy chief economist at the Bank of Montreal. “The domestic side of the economy has come flaring back almost to where it was before the recession began.”

Mr. Porter recently boosted his forecast for growth in Canada’s gross domestic product in the first quarter by a full percentage point to 4.7 per cent. He also now believes the economy will grow 3.2 per cent this year, rather than the 3 per cent he had previously predicted.

Two sectors have been driving the turnaround – the labour market and housing.

Unlike their U.S. counterparts, Canadian companies have been hiring. The unemployment rate dropped from 8.7 per cent last August to 8.2 per cent in February, and roughly 60,000 full-time jobs were created last month alone. While some of the hiring was due to government spending and the Vancouver Olympics, economists say the private sector played a significant role too.

As for home sales, Canada didn’t come close to experiencing the meltdown in real estate that occurred in the United States, and our housing market has been on a tear recently. Home sales, while slowing this year, jumped 44 per cent year over year in February, and the average price of all homes sold on the Multiple Listing Service was $335,655, up 18.2 per cent from a year ago.