Economy grew at 1.3% pace to start 2018, slower than 2017 pace

Canada's economy grew at a 1.3 per cent annual pace in the first three months of the year, worse than what economists had been expecting.

Statistics Canada reported Thursday that reduced investment in the housing market, a slowdown in consumer spending, and lower exports of everything but energy products contributed to the underwhelming number.

While it grew slightly, household spending came in at its slowest pace of growth since 2015. And spending on housing fell by 1.9 per cent between January and March, the largest decline since the first quarter of 2009.

Economists had been expecting the pace of growth to come in at around 1.8 per cent. In the last three months of 2017, for example, the economy was expanding at a 1.7 per cent pace.

But the numbers were in line with the Bank of Canada's thinking. In its April Monetary Policy Report, the central bank projected the figure to come in at 1.3 per cent for the first three months of the year. As it turns out, that projection was exactly on the nose.

"The main point is that growth for the full year still looks on track to come in around 2 per cent, which is very much in line with what the Bank of Canada has been expecting," BMO economist Doug Porter said. "We continue to look for a rebound in Q2 growth and a July rate hike, albeit with the latter predicated on some solid evidence on the former."

The numbers took some of the wind out of the sails of the loonie, which had gained almost a cent on Wednesday after the central bank strongly suggested another rate hike as early as July.

But the loonie gave most of that back on Thursday and was changing hands at about 77.65 cents US when the GDP numbers came out on Thursday.