The economy got a bounce in April, easing fears that the annual pace of growth would remain below 2 per cent, but the key areas of strength – energy and mining – underscore Canada's dependence on its commodities.
Gross domestic product increased by 0.3 per cent, Statistics Canada reported Friday, as energy output bounced back from temporary shutdowns in the previous couple of months and mining companies increased production. The gain was one tick more than analysts were expecting, and followed a 0.1-per-cent increase in March and a 0.2-per cent contraction in February.
The better-than-expected April number suggests the economy had decent momentum in the early part of the second quarter, which might point to a limited impact so far from Europe's troubles and an increasingly anemic U.S. recovery, and helped the Canadian dollar gain more than a full cent in trading on Friday. The Bank of Canada has acknowledged that its forecasts for the year (to be updated in mid-July) are not panning out, and there is little expectation Governor Mark Carney will be able to safely raise interest rates before next year.
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The mining and oil-and-gas extraction sector grew 2.7 per cent in April, but most other industries saw tiny gains or declines. Manufacturers posted a 0.3-per cent drop, despite a good month for auto production; construction slipped 0.1 per cent; retail fell 0.8 per cent.
"Excluding the rebound in the resource sector, growth was barely positive, pointing to a tame underlying trend," Emanuella Enenajor of CIBC World Markets said in a note to clients.
The retail drop is the latest sign that consumers – who account for between 60 per cent and 70 per cent of economic activity – are either reaching the limits of their capacity to borrow and spend, or are holding back because they're worried about losing their jobs amid all the global turmoil.
With files from reporter Sean Silcoff