Economy grew at 6.1% annual pace in Q1

Canada's economy expanded by 1.5 per cent in this year's first quarter, the third straight gain after a recession.

Statistics Canada released data Monday showing Canada's gross domestic product grew by 1.5 per cent between January and March inclusive, following a 1.2 per cent gain in the three months before that.

GDP was growing at a 6.1 per cent annualized rate in the first quarter, compared with 4.9 per cent in the fourth quarter of 2009. That pace of growth is the strongest in more than a decade.

The U.S. economy expanded at a three per cent pace during the same period.

Goods-producing Canadian industries grew by 2.7 per cent during the quarter, outpacing the 1.1 per cent gain in services. In manufacturing, the gains were widespread, with durable and non-durable goods advancing 5.9 per cent and 2.1 per cent, respectively.

Increased consumer spending, a hot housing market and government spending — although less than before — helped power the gains.

Pressure to raise rates

Calling the figure "stunning," TD economist Diana Petramala cautioned in a note Monday morning that the pace is likely to soften.

"The blockbuster performance is unlikely to be repeated," she said, as consumer spending and housing activity likely cannibalized future activity.

The GDP data comes a day before the Bank of Canada meets for a regularly scheduled six-week policy meeting.

Considering news a few weeks ago that the Canadian economy added 109,000 jobs in April (its best month ever) and the latest data suggesting the Canadian economy is expanding at its fastest pace since 1999, the bank will face pressure to raise its benchmark interest rate for the first time in three years.

"If you had to answer the question, 'Why should the Bank of Canada be raising interest rates?' said BMO chief economist Douglas Porter in a note Monday, "back-to-back quarters of GDP growth of 4.9 per cent and 6.1 per cent is a pretty good place to start."