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May 1, 2018

Canadian economy rebounds as oil and auto production ramps up

Canadian GDP up 0.4% month-over-month in February

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Canada’s economy rebounded more than economists forecast in February, as idled oil and auto production came back on line.

Gross domestic product expanded 0.4 per cent during the month following a 0.1 per cent contraction in January, Statistics Canada reported Tuesday in Ottawa. Economists anticipated a 0.3 per cent gain.

“It’s really nice to see a three-handle, said Lyle Stein, senior portfolio manager and managing director at Vestcap Investment Management, of the GDP numbers in an interview with BNN Bloomberg. “The fact is we had that soft period. It puts into doubt the fact that we might be going into a greater slowdown.”

The bounce back provides some reassurance the economy is poised to emerge from a recent soft patch of growth, particularly given broad-based gains in key sectors such as manufacturing and signs that rail bottlenecks may be dissipating.

Most economists forecast the economy grew by less than 2 per cent in the first quarter, before returning to above-2 per cent growth for the rest of the year.

The Bank of Canada estimates first-quarter growth of 1.3 per cent, before the expansion accelerates to well above 2 per cent in the second quarter.

The GDP numbers for the first two months suggest there is potential for an upside surprise in the first quarter, with the economy tracking just under an annualized 2 per cent pace currently.

“I wouldn’t get too excited – I don’t think this is anything to write home about, but at least we’re getting some growth as we move through the first quarter of the year,” said Derek Burleton, VP and deputy chief economist, TD Bank Group, in an interview with BNN Bloomberg.  “I think the second quarter is going to be better.”

- With files from BNN Bloomberg

HIGHLIGHTS

-Extraction from the oil sands was up 3 per cent as production returned to normal following shutdowns in January 

-Excluding energy, GDP in February was up 0.3 per cent following a 0.1 per cent gain in January

-Manufacturing was up 1 per cent, driven higher by autos as production in that sector returned to normal following shutdowns

-Strong home building to start the year helped drive up activity in the construction sector by 0.7 per cent

-Rail transportation -- which has been an issue for Canada this year -- edged down 0.1 per cent, much better than the 3.4 per cent decline in January

-The real estate sector remains a drag on the economy after tighter mortgage rules were introduced at the start of the year.

-Activity of real estate agents and brokers fell 7.9 per cent in February after a 12.9 per cent drop in January

-Goods-producing industries were up 1.2 per cent, versus 0.1 per cent for services

-Fifteen of 20 industrial sectors recorded higher activity in February

--With assistance from Erik Hertzberg.

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