Canada's economy posted gains in February, gaining for three consecutive quarters, showing just how successful a major commodity nation can be in times of global uncertainty.
Canada's economy is growing
Real gross domestic product rose 0.8% in February due to growth in output and resources, Statistics Canada said in a statement. In January, the economy expanded 0.2%, a tenth of a percent better than expected, despite tightening restrictions related to the pandemic and some of the political turmoil that has plagued the Trudeau government of late.
Statistics Canada also revised the December GDP growth rate upward to 0.1% from previous values.
Economists say a strong start to the year gives analysts hope that first-quarter GDP is well above the Bank of Canada's current forecast of 2.0%.
Services have remained stagnant as the winter outbreak of Covid-19 has led to additional movement and contact restrictions, although the February estimate suggested a partial cancellation of accommodation and food services.
In January, activity in goods-producing industries rebounded, helped by a strong recovery in construction and a surge in demand for utilities.
"At the start of the year, activity was expected to slow down somewhat due to pandemic-related restrictions, but unlike past waves, this did not happen," said Benjamin Reitzes, a Canadian rate and macro economist. "It looks like GDP growth in the first quarter will be around 4% year on year."
Canada's economy is now 1.2% above pre-pandemic levels, thanks to strong manufacturing gains, according to Statscan. However, inflation rose to 5.7%. In turn, this could push the Bank of Canada to more aggressive rate hikes as early as April.
"The bank can deliver on its recent promise ... that it will aggressively fight inflation, perhaps by raising interest rates by 50 basis points," said Stephen Brown, a senior economist in Canada.
So economists see a 50% chance of a 50 basis point hike to 1.0% on April 13th.
After excellent data for February, economists are revising their forecasts for the first quarter upwards.
After the release of the report, the Canadian dollar traded down 0.3% to 1.2517 against the US dollar, or 79.89 US cents, due to falling oil prices and the growth of the US dollar associated with the ongoing conflict between Ukraine and Russia.