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Like most people, I'm a shameless economic-growth cheerleader. So I'm encouraged to see Canada's gross domestic product showing better-than-expected growth for February.
I'm just not that encouraged.
Yes, Statistics Canada reported Tuesday morning that GDP grew by 0.3 per cent in February, better than the 0.2 per cent that economists had anticipated. It also revised upward its January estimate, to 0.3 per cent from 0.2 per cent.
These numbers put Canada on pace for something like a 2.5-per-cent annualized growth for the entire first quarter; even if March GDP were to show no growth whatsoever, the quarter's GDP would still top 2-per-cent annualized, economists noted. That's well above the Bank of Canada's most recent forecast of 1.5 per cent – a number most economists generally agreed with.
But before we get too excited, let's look at the details.
February's gains were driven in a big way by mining, oil and gas extraction – it surged 2.2 per cent in the month, and accounted for half of the month's GDP growth. Meanwhile, government's contribution to GDP slipped 0.1 per cent.
On the resource-extraction front, there was excitement over a huge 22-per-cent jump in potash extraction – thanks chiefly to new export contracts for 2013 for major buyers such as China that are taking advantage of much cheaper prices to aggressively restock after a long absence from buying. But the fact is that the mined fertilizer product makes up only 0.1 per cent of the country's total GDP; it accounted for only about 5 per cent of February's GDP increase.
The more significant story was in the big oil and gas sector, where a strong rebound in Canadian producers' oil prices, as well as a sharp narrowing of the discount to U.S. oil price benchmarks, fuelled a 1-per-cent jump in the month. That probably bodes well for March GDP, too, as the pricing improvements continued last month. But with the Canadian price discount now at historically normal levels and with oil prices retreating, the strong growth in this segment doesn't look sustainable beyond the first quarter.
Meanwhile, the small drag from government on the GDP numbers is unlikely to improve, with the federal government committed to substantial deficit reduction and many provinces following suit. On Monday, Canada's Parliamentary Budget Officer estimated that the federal government's budget plans will subtract about 0.2 per cent from real GDP this year.
In short, the biggest contributor to the first-quarter upside surprise may not have much fuel left in the tank, while a major economic weak spot is unlikely to pick up the slack. There's little here to convince anyone that the tepid economic outlook for the rest of the year has changed – or that the Bank of Canada's far-in-the-distance interest rate increases are any closer.
David Parkinson is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow him on Twitter at @parkinsonglobe.