OTTAWA - The Canadian economy appears to be gathering steam, to the surprise of many, with better-than-expected growth rates in the first two months of the year that have many analysts revising their miserly forecasts for the year.
In the first welcome economic news in several weeks, Statistics Canada reported Tuesday that the country's output expanded by 0.3 per cent in February. What's more it revised upward an earlier calculation for January by one notch, also to 0.3 per cent.
The Canadian dollar climbed about half a cent on the news to 99.36 cents US in morning trading.
"We can cheer not only the February result, but as well an upward revision to January and what now looks like a reasonably good first quarter," said CIBC chief economist Avery Shenfeld.
Economist Jimmy Jean of Desjardins Capital Markets noted that the growth numbers were not "soft," or the result of rounding. The actual growth figures for January and February were 0.33 and 0.34 per cent respectively.
"An unquestionably solid report, which changes the picture somewhat with respect to the first quarter," he said.
Analysts now are pencilling in annualized growth rates of up to 2.5 per cent for the first three months of the year, a pace that would make it the strongest in more than a year.
That's about where the Bank of Canada had been before a spate of under-performing indicators suggested the country's economy remained mired in the same stall that characterized the second half of 2012, when growth averaged 0.7 per cent. The central bank recently revised it's first-quarter estimate to 1.5 per cent.
But Shenfeld said the results suggest that some of the recent weakness, particularly in the resource sector, was due to temporary production difficulties.
That sector rebounded strongly to 2.2 per cent growth in February, led by mining, quarrying and oil and gas extraction. It was fifth consecutive month of growth for the industries.
As well, manufacturing rose 0.8 per cent in February, building on a 0.6 per cent gain the previous month.
And the return of the NHL from an owner-imposed lockout also appears to have played a minor role. Arts and entertainment soared 3.3 per cent, on the back of a four per cent increase in January.
Still, it's no time "to break out the champagne," said TD economist Leslie Preston.
"U.S. growth is looking a bit soft in the second quarter and we expect Canada still has a long road back to the kind of growth that would see the Bank of Canada step off the sidelines, especially with inflation remaining benign."
Shenfeld cautioned that the advance follows a very weak end of 2012. The fast start might push gross domestic product up about one tenth or two tenths from previous calls of about 1.5 per cent for the year. That is still below the two per cent pace that the Bank of Canada considers the economy's cruising speed.
Other winners in February included durable goods production, which grew 0.7 per cent, as well transportation equipment, non-metallic mineral products and computer and electronic products. Non-durable goods production increased one per cent.
Construction, utilities and the agriculture and forestry sectors also grew, while the output of service industries rose 0.1 per cent, mostly because of growth in arts and entertainment, the public sector and the finance and insurance sectors.
However, accommodation and food services, administrative and professional services and wholesale trade declined.