OTTAWA Rising exports helped rouse the Canadian economy from a sluggish second half of 2012 to grow at an annualized rate of 2.5 percent in the first quarter of this year, the fastest pace in six quarters, Statistics Canada reported on Friday.
The real growth rate was well above the Bank of Canada's forecast in April of 1.5 percent, topped the median projection of 2.3 percent in a Reuters survey and outpaced U.S. growth of 2.4 percent for the quarter. Statscan also revised up fourth-quarter growth to 0.9 percent from 0.6 percent.
The mediocre performance in the second half of last year had been partially due to temporary factors, particularly in the oil and gas sector in the third quarter, but a rebound in mining, oil and gas extraction became the main source of industrial growth in the first three months of 2013.
"It does suggest what we saw in the second half last year was more of a pause than the start of a new trend. With the monthly numbers continuing to grow through the quarter, it sets us up for a decent second quarter as well," said Royal Bank of Canada chief economist Craig Wright.
The Canadian dollar strengthened to C$1.0304 to the greenback, or 97.05 U.S. cents from C$1.0333 just before the data.
Exports of goods and services overwhelmingly made the biggest contribution to overall growth in the quarter. On a non-annualized basis, gross domestic product grew by 0.6 percent; the growth in final domestic demand was only 0.1 percent, the weakest showing in four years.
Consumer spending grew slightly, current spending by governments also rose, and businesses added to their inventories. Investment, however, fell, with a decline in business investment in housing helping to outweigh investment in plant and equipment. Government fixed capital investment also fell.
Wright said the data pointed to the rotation in sources of growth that policymakers had said was needed for Canada's growth to be sustainable
"As consumers moderate, government pulls back, we need exports to contribute more to growth and investment. It looks like exports have contributed growth for the second consecutive quarter," he said.
Bank of Montreal chief economist Doug Porter said the data might cause the market to price in a slightly greater chance of the Bank of Canada raising interest rates earlier next year than originally thought but it should not change the outlook dramatically.
"I think what it will do is quiet some of the talk about the possibility of the bank considering easing - there are always some voices out there saying that," he said.
(Additional reporting by Andrea Hopkins, Alastair Sharp and John Tilak in Toronto; Editing by Theodore d'Afflisio)