Canada's economy heated up in January

The Canadian economy continued its red-hot recovery as gross domestic product grew in January at an annual rate of more than six per cent, Statistics Canada said Wednesday.

Canada's GDP expanded by 0.6 per cent in the first month of 2010, compared with December 2009.

"Real gross domestic product advanced 0.6 per cent in January, a fifth consecutive monthly increase," Statistics Canada said.

Leading the economic charge were the country's manufacturing and construction sectors.

Goods makers, who have seen output slump badly during the recent recession, hiked production 1.9 per cent in January, compared with December's output expansion of 1.2 per cent.

Canada's construction sector also posted good growth numbers, up 1.7 per cent.

Bragging rights

The federal government said the latest figures show Ottawa's stimulus programs are bearing financial fruit.

"It shows our plans for the economy are working. We're seeing strength across a number of sectors including retail and manufacturing," said Industry Minister Tony Clement after a caucus meeting in Ottawa.

And many economist are hitting the same positive note.

Doug Porter of BMO Economics estimated the country's economy has expanded at a rate in excess of five per cent for the past six months.

"To put that in perspective, that’s the fastest six-month growth rate since early 2000 (at the height of the tech boom), topping anything seen during the  commodity boom of the past decade," he said in a morning note on the GDP numbers.

Better than forecast

The stellar January showing builds upon a wave of good financial news indicating a Canadian economy recovering far faster than many economists imagined.

In February, the country added 60,000 new full-time jobs, compared with January. The total number was also up 100,000 from February 2009.

Statistics Canada's GDP measurement usually lags both its monthly employment and inflation figures. 

Honda Canada and General Motors Canada both recently announced they were expanding workforces in their automobile production facilities.

In addition, Lakeside Steel Inc. in Welland, Ont., said it is boosting its operations in anticipation of increased demand for its products.

Overall, improved housing starts and consumer spending and a rising stock market have analysts hiking their estimates of national economic growth.

For instance, in recent weeks CIBC's Avery Shenfeld boosted his forecast of 2010 GDP expansion by a full percentage point over earlier projections.

Indeed, many economists are looking for Canada's economy to grow at least 1.5 percentage points faster than the Bank of Canada's previous forecast.

Better than others

For many experts, the Canadian economy appears to be pulling away from other industrialized countries in the race to recover for the recession of 2008-09.

Europe, for example, is posting a February inflation rate that hit a two-year high and an unemployment rate that is almost 1.5 percentage points higher than Canada's.

CIBC's Shenfeld now expects Canada to grow by 5.1 per cent in the first three months of 2010, more than double the American rate of 2.5 per cent. For all of 2010, the U.S. economy should grow by three per cent, slightly better than Canada's forecast 2.9 per cent, according to CIBC.

But Canada's 2010 jobless rate, forecast at 8.2 per cent, will be lower than the U.S. rate of 10 per cent, CIBC predicts.

Higher dollar

In response to the strong GDP results, international currency traders drove up the value of the Canadian dollar in Wednesday's trading.

The loonie hit 98.53 cents US in the morning session, a gain of almost half a cent versus Tuesday's close of 98.09 cents.

Wednesday's trading added to the currency's winning streak for 2010.

So far this year, the loonie has gained 24 per cent versus the American dollar and 21 per cent compared to the euro.