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An employee feeds a furnace steel struts on the assembly line at Standen's Ltd. in Calgary (Chris Bolin/Chris Bolin for The Globe and Mail)
An employee feeds a furnace steel struts on the assembly line at Standen's Ltd. in Calgary (Chris Bolin/Chris Bolin for The Globe and Mail)

Canada's economy grows 0.3 per cent Add to ...

The Canadian economy grew for a sixth straight month in February, as the manufacturing sector powered the recovery ahead while the Vancouver Winter Olympics also provided a lift.

The 0.3-per-cent expansion reported by Statistics Canada Friday was in line with economists' forecasts and came largely on the strength of a 1.2-per-cent gain for factories, which saw increases in production of goods such as metals and pharmaceuticals.

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Other sources of growth included the mining sector, as well as industries such as arts, sports and hotels that got a boost from the Olympics, Statscan said.

The February GDP reading, while just half the 0.6-per-cent monthly pace recorded for January, means the economy likely grew 5.6 per cent on an annualized basis in the six months leading up to the report, Bank of Montreal deputy chief economist Doug Porter said in a note, "leaving talk of a subdued recovery in the dust."

Bank of Canada Governor Mark Carney said last week that the economy likely expanded at a 5.8-per-cent annualized pace in the first three months of the year, a rate that would be the fastest in more than a decade. However, though Mr. Carney last week scrapped a conditional pledge to keep interest rates at rock-bottom levels through midyear depending on inflation, he has said there's nothing "pre-ordained" about when and how quickly he may tighten borrowing costs.

Future moves will be dictated by how inflation and growth evolve in the coming months, Mr. Carney has suggested, and economists' projections indicate the central bank has good reason to take a wait-and-see approach.

"We continue to expect overall growth to simmer down in the months ahead, with auto and home sales already back to pre-recession levels and the housing market poised to cool considerably," Mr. Porter wrote. "As well, manufacturing faces more of an uphill challenge now that the initial inventory bounce is largely over and the strong [currency]will weigh more heavily. Still, the initial stages of Canada's recovery were simply much, much more impressive than almost anyone expected."

The retail industry grew by 0.6 per cent and, in part thanks to the Olympics, the arts and entertainment sector saw a 6.1-per-cent gain, Statscan said.

Manufacturers, to an extent, have shrugged off the high Canadian dollar, which exceeded parity with the U.S. currency early this month for the first time since 2008 and which makes exported goods more expensive to foreign buyers. Still, Mr. Carney has said repeatedly that the central bank views the loonie's strength as a risk to the economic rebound.

The Canadian currency had hovered around parity for weeks and was little changed after the GDP report.

Meanwhile, the U.S. economy grew at a 3.2-per-cent annual rate in the first three months of the year, capping the biggest six-month gain since 2003, the U.S. Commerce Department reported Friday in Washington.

The gain came as American households spent more, supporting increased sales at some of the country's biggest companies and potentially paving the way for more hiring in the world's largest economy.

Follow on Twitter: @jeremytorobin

 

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