Canada’s Economy Posts First Growth in Three Months in April

Canada’s gross domestic product eked out the first gain in three months in April, as the real estate boom in Toronto and Vancouver and robust consumer spending offset weakness in oil production, at least for a month.

Output grew 0.1 percent, Statistics Canada said Thursday in Ottawa, matching the median forecast in a Bloomberg survey of economists. The increase follows declines of 0.2 percent in March and 0.1 percent in February.

Canada is becoming increasingly reliant on households to drive growth in an economy ravaged by the oil crisis, with the data poised to only get worse when the impact of Alberta’s May wildfires gets factored in. Bank of Canada Governor Stephen Poloz signaled this month the economy probably shrank in the second quarter.

“The bank is probably just going to be on the sidelines, looking at fairly sizable swings in growth,” Paul Ferley, assistant chief economist at Royal Bank of Canada, said by phone from Toronto.

Output may shrink at about a 1 percent annualized pace in the second quarter, Ferley said, leaving growth for 2016 at a “fairly modest” 1.3 percent.

Canada’s dollar weakened 0.3 percent to C$1.2971 per U.S. dollar at 9:50 a.m. Toronto time.

Consumers once again did much of the heavy lifting in April. Retailing advanced 0.2 percent and is up 2.3 percent over the past four months. The real estate sector rose 0.5 percent in April, driven by a 3.3 percent gain in output of real estate brokers, on the back of what policy makers have warned is an alarming housing-price surge in Vancouver and Toronto.

On the goods-producing side, manufacturing gained 0.4 percent, while heavy oil production dropped by 7.3 percent.

Alberta Wildfires

Falling crude oil production is likely to shrink the economy in May, with Alberta wildfires knocking about 1 million barrels of production a day offline and forcing the evacuation of at least 80,000 people from Fort McMurray.

Canadians were perhaps more worried about the state of their favored sport in April. The arts and entertainment category dropped by 3.9 percent as no Canadian teams made the National Hockey League playoffs, Statistics Canada said. It was the largest percentage decline since February 2014 for the sector, though in a category that makes up about 0.7 percent of Canada’s economy.

Thursday’s report also showed a divide between goods and services production. Goods production has stalled over the last 12 months while services gained 2.1 percent, leaving the overall economy with an expansion of 1.5 percent from a year earlier.

(Adds economist comment in sixth paragraph.)

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