Canada April Economic Growth Accelerates to 0.3% on Oil

Canada’s economic growth accelerated in April as the country’s oil and gas producers recovered from shutdowns earlier this year and mining companies boosted output.

Gross domestic product expanded 0.3 percent following a March gain of 0.1 percent, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg News projected a 0.2 percent gain, based on the median of 23 estimates. Mining and oil and gas extraction advanced 2.7 percent, after declining in the previous two months following maintenance shutdowns.

The data suggest the world’s 10th largest economy is set to accelerate in the second quarter from the 1.9 percent annualized pace recorded for prior three months as Bank of Canada Governor Mark Carney considers raising borrowing costs. Carney forecast in April that growth in the first two quarters of this year would be 2.5 percent, and that an interest-rate increase “may become appropriate” as the economy approaches its capacity.

“To help sustain this higher growth rate and to counter financial market pressures emanating from the European sovereign debt crisis, the Bank of Canada is likely to keep monetary conditions highly accommodative in the near term,” Paul Ferley, assistant chief economist at Royal Bank of Canada in Toronto, said in a note to investors.

The central bank has kept its benchmark rate unchanged at 1 percent since September 2010.

Rate Increase

Investors have been paring bets on a Bank of Canada interest-rate increase amid the deepening debt crisis in Europe and as Carney said the economy may grow less than the bank projected this year.

“Since our previous forecast in April, there has been a further slowing in global activity, including marginally in the U.S., and the first quarter was somewhat weakened,” Carney told reporters in Halifax, Nova Scotia on June 21.

The central bank, which has forecast the country’s economy would expand by 2.4 percent for 2012 as a whole, will update its outlook in a monetary policy report to be published July 18. Economists surveyed by Bloomberg anticipate 2.1 percent growth for Canada in 2012, the third highest among Group of Seven nations. The economy grew 2 percent in April from a year earlier, Statistics Canada reported today.

Swap Rate

Canada’s 12-month overnight index swap rate, which is tied to forecasts for the Bank of Canada’s policy rate, was 0.9325 percent at 9:58 a.m. in Toronto trading, from 0.8804 percent late yesterday and 0.9547 percent at the end of last week.

Canada’s dollar climbed 1.4 percent to C$1.0192 per U.S. dollar in Toronto from 1.0332 late yesterday.

Oil and gas extraction advanced 2.4 percent in April, while support activities for the industry, such as drilling and rigging services, rose 5.1 percent, Statistics Canada said today. Mining excluding oil and gas rose 3.1 percent, Statistics Canada said.

Wholesalers increased output by 1.2 percent in April, a fifth consecutive gain, while transportation services advanced 0.7 percent. Manufacturers recorded a 0.3 percent decline in production, and construction output was down 0.1 percent.

In a separate report, Statistics Canada said raw material costs for the country’s industrial companies fell 1 percent in May on lower prices for crude oil, while the prices of their finished products were unchanged. Economists surveyed by Bloomberg News projected raw material prices would fall 2 percent, while finished products would be unchanged in May. From a year earlier, raw material costs fell 9.9 percent, and the industrial-product price index rose 0.7 percent.

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