Canada Economy Rebounded in January on Manufacturing

Canada’s gross domestic product rebounded in January as manufacturers led an expansion that was faster than economists anticipated.

The world’s 11th largest economy grew by 0.5 percent to an annualized C$1.61 trillion ($1.46 trillion), recouping December’s 0.5 percent decline, Statistics Canada said today in Ottawa. The median forecast in a Bloomberg economist survey was for output to grow 0.4 percent.

Canada’s dollar rose as the data suggested an economy holding on through a harsh winter that Bank of Canada Governor Stephen Poloz said is restraining output. Canada’s biggest trading partner is also shrugging off the bad weather, with the U.S. reporting on March 27 consumer spending rose the most in three years between October and December.

“It was a fairly solid report,” said Mazen Issa, senior Canada macro strategist at TD Securities in Toronto. “You are looking at the first quarter being not as bad as we had initially thought it could be,” with growth of as much as 1.8 percent, he said.

Canada’s dollar rose 0.3 percent to C$1.1027 per U.S. dollar at 9:49 a.m. in Toronto, the sixth gain in seven days. One Canadian dollar buys 90.69 U.S. cents. Government bond yields rose including the security due in five years, which increased to 1.74 percent from 1.71 percent, headed for the highest close since Jan. 15.

Factory Rebound

Manufacturing grew 2.0 percent in January on gains in durable goods following a December drop of 1.9 percent, Statistics Canada said today. Output of all goods-producing companies rose by 1 percent with increases in mining, oil and gas extraction and construction.

“I feel optimistic for 2014 and into the future,” Gear Energy Ltd. Chief Executive Officer Ingram Gillmore said in a March 3 interview. “The strength of the realized oil and gas prices right now are incentivizing companies in western Canada in particular to increase their capital investments.”

Wholesaling rose by 0.7 percent in January and retailing by 1.3 percent. Both industries recovered part of larger declines seen in December.

The winter in Toronto, Canada’s biggest city, was the coldest since 1976-77 according to data compiled by Bloomberg. Poloz said March 18 that first-quarter growth may be “softer” than the Bank of Canada forecast in January because of bad weather and other factors he didn’t detail. Central bank officials have said it will take about two years for the economy to return to full output.

Growth Forecasts

After growing at a 2.9 percent rate in the last three months of 2013, gross domestic product will probably expand at a 2.5 percent pace in the first three quarters of this year, the Bank of Canada predicted in January. The bank will update its growth forecasts in April.

Other parts of the economy have suggested weakness, with inflation close to the bottom of the central bank’s 1 percent to 3 percent target range, and slow employment growth.

In a separate report, Statistics Canada said average weekly earnings of non-farm payroll employees rose 3.0 percent in January from a year earlier. Payroll employment fell 7,000 from December to 15.48 million.

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