Charles St-Arnaud, Research Analyst at Nomura, suggests that a recovery in the manufacturing sector and in most sectors has pushed the Canadian growth higher.
Key Quotes
“Monthly GDP increased by 0.6% m-o-m in January, much higher than expectations, and follows a 0.2% m-o-m rise in December. This is the strongest monthly growth since July 2011.
The goods-producing side of the economy increased 1.2% on the month. Growth in the sector came mainly from a rise in manufacturing (+1.9% m-o-m), the mining, oil and gas sector (+0.9% m-o-m), utilities (+2.7%) and construction (+0.5% m-o-m).
The services sector increased 0.4% month-on-month, mainly owing to increased activity in retail trade (+1.5% m-o-m), transportation and warehousing (+1.4% m-o-m), finance and insurance (+0.6% m-o-m). These increases were offset by losses in wholesale trade (-0.2% m-o-m), arts and entertainment (-1.2% m-o-m) and management of companies and enterprises (-0.3% m-o-m).
Overall, this is a very positive report showing that growth continues to recover. The rebound in manufacturing activity over the past three months and in the non-resource sector suggests that 1) improved growth in the US is helping Canada, 2) the weaker exchange rate is helping growth and 3) the non-resource sector is strengthening. The question is whether the momentum will continue. Nevertheless, the strong start to Q1 suggests that growth could be above 3% q-o-q ar. We continue to believe that the Bank of Canada will keep rates on hold for the rest of the year.”
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