Aaaand... exports are back!


To recap:

  • GDP grew at a healthy 2.5 per cent annualized rate in the first three months of the year, Statistics Canada said this morning. That’s far above the below one per cent rate of the last quarter of 2012 and even a notch above the U.S., whose January-to-March performance was revised down slightly yesterday to 2.4 per cent.
  • Most of the growth came from exports, which were up 6.2 per cent annualized after posting lacklustre growth for all of 2012.
  • Consumers pulled the brakes on shopping, with household spending slowing to 0.9 per cent annualized growth from close to 2.5 per cent through the second half of last year.
  • Business investment dipped, largely due to slowing activity in the residential real estate sector, which dipped 4.7 per cent on an annual basis.
  • Overall, domestic demand, which includes both the private and public sector, inched up a mere 0.6 per cent annualized, the smallest gain since the first three months of 2009.
  • For the month of March, GDP was up 0.2 per cent, above analysts’ expectations.

What the analysts are saying:

  • “The engines of growth in Canada are beginning to shift,” writes TD’s Leslie Preston: Net export are finally picking up speed as consumer spending and housing lose steam. A pick-up in growth south of the border during the second half of the year should reinforce the trend.
  • While the housing sector is likely in for a protracted slump, business and consumer spending should revive “as a strengthening in US growth and easing of concerns about the effect of the fiscal austerity measures bolster confidence,” according to RBC’s Dawn Desjardins.
  • The 0.2 per cent pace in March is good news too, according to CIBC’s Emanuella Enenajor: “That should mark a decent handoff to the second quarter, with growth likely to track a 2% pace in Q2.”
  • With 2013 kicking off on such a good note, expect incoming Bank of Canada Governor Stephen Poloz to maintain the bank’s stance that the next interest rate move will be a hike, writes Preston
  • RBC sees rates steady at one per cent until the second half of 2014.


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