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Construction in downtown Calgary.

todd korol The Globe and Mail

Canada's economy grew 0.5 per cent in January, reversing the effects of the December ice storm in Eastern Canada.

The bounce-back was anticipated by economists after a 0.5 per cent contraction in gross domestic product in December, when a winter storm knocked out power to hundreds of thousands of homes and businesses.

"What goes down can come up, at least when the drop was all due to the weather," CIBC World Markets economist Avery Shenfeld said.

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The goods-producing sector led the way in January with gains of 2 per cent for manufacturing and 1.2 per cent for the mining and oil-and-gas sectors, according to a report released Monday by Statistics Canada.

The retail sector, which was hit hard in December because of bad weather, also rebounded, posting a 1.3 per cent monthly gain in January. There were also gains in wholesale trade, finance, insurance, accommodation, food services, and transportation and warehousing services.

The service sector overall expanded 0.3 per cent.

Those gains were offset by declines in agriculture (-1.9 per cent) and utilities (-1.1 per cent). Grain shipments have been slowed by last year's bumper crop and inadequate rail shipping capacity.

Economists still expect the first quarter to be relatively weak – perhaps a 1.2 per cent annual pace.

That's well below the Bank of Canada's official call of a 2.5 per cent GDP gain in the first quarter. And it could force governor Stephen Poloz to lower the banks forecasts in the next monetary policy report, due out April 16.

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