The Canadian economy was roaring in the first quarter, jumping ahead of even the rosy estimates of economists to post an oversized 6.1 per cent annualized advance during the first three months of 2010.
It was the largest quarterly expansion in more than a decade.
The number doubled what the U.S. economy managed to produce and bettered the consensus forecast for a 5.8 per cent increase.
As significant was that output in March, the last month of the quarter, advanced 0.6 per cent from February, giving the economy a strong hand-off to the second quarter.
With the Bank of Canada scheduled to make a decision on interest rates on Tuesday morning, the gross domestic product data is expected to add to the pressure on governor Mark Carney to move rates higher for the first time in about three years.
“It would take some fancy footwork for the Bank of Canada to pass on hiking rates tomorrow after the Canadian economy just doubled the U.S. quarter-one growth pace,” Scotiabank economists Derek Holt and Karen Cordes Woods wrote in a note.
“This is the strongest growth pace witnessed since 1999 and it is the latest evidence of how the Canadian economy and Canadian markets are outperforming much of the rest of the industrialized world.”
They noted that the level of the economic activity in Canada is now roughly back to where it stood prior to the recession taking hold in the fourth quarter of 2008.
One a quarter-over-quarter basis, GDP advanced 1.5 per cent following a 1.2 per cent increase in the fourth quarter.
Statistics Canada credited consumer spending, housing and manufacturing for the stellar results, but all industries were solidly in the plus column.
While markets expected a strong result, the oversized growth pushed the Canadian dollar up more than three-quarters of a cent to 95.89 cents US in light early trading. U.S. markets were closed for Memorial Day on Monday.
Economists caution that the torrid pace of growth cannot continue, and with European woes weighing down global prospects, the moderation in Canadian output may have already begun.
“We are of the view that much better-than-expected consumer spending and housing market performances so far this year came at the expense of future growth,” said TD Bank’s Diana Petramala.
“The recent spending spree has left consumers even more fatigued and highly indebted than ever. As interest rates begin to rise (as early as this week) and households have to devote a greater share of their income to servicing their debt, this may well constrain future consumer spending growth.”
Tom Sweeney 