Canada's GDP Expands 3.9%
By NIRMALA MENON
OTTAWA—Canada's economy expanded at a 3.9% annualized pace in January through March, the fastest clip in a year and more than double the rate in the U.S., as businesses replenished inventories and boosted investment spending and exports rose while consumer and government spending stalled, Statistics Canada said Monday.
Gross domestic product growth was marginally below the consensus call of 4%, and also undershot the Bank of Canada's 4.2% forecast.
GDP growth accelerated from a downwardly revised 3.1% in the fourth quarter, which was originally reported at 3.3%. The economic performance was the reverse of the U.S. where growth decelerated to 1.8% in the first quarter from 3.1% previously.
On a quarterly basis, GDP in Canada accelerated 1% from 0.8% in the fourth quarter of 2010. Final domestic demand grew 0.6%, half the pace of the previous period.
Export growth slowed to 1.6% from 2.1% while imports rebounded 2.2% after declining 0.1% previously.
Businesses added C$10.55 billion to inventories, a big jump from the tiny C$185 million increase in the fourth quarter.
Consumer spending on goods and services held steady, the worst showing in two years. Government current expenditures on goods and services stalled after three consecutive increases.
The economic handoff into the second quarter was stronger than expected, with monthly GDP rebounding 0.3% as manufacturing output bounced back 1.8%, the strongest gain since December 2006. The market had expected monthly growth of 0.2%. The previous month's contraction was revised to 0.1% from the originally estimated 0.2%.
The economy is likely to decelerate in the current quarter as supply chains, notably in the key auto manufacturing sector, were disrupted after the tsunami and earthquake in Japan in March. The central bank has forecast growth to slow to 2% in the current three month period and pick up to 2.7% in each of the remaining two quarters.
The economy expanded 3.2% in 2010, revised up a tad from the previously estimated 3.1%
The data reinforce expectations for the central bank to hold the benchmark overnight rate steady at 1% for the sixth consecutive time Tuesday, but to resume rate hikes later in the year.
Renewed concerns about euro-zone sovereign debt issues and softer-than-expected inflation in April have led several economists to push back the timeline for the bank to resume rate hikes.