Hockey helps Canada's economy grow again in January

Thu Mar 28, 2013 11:35am EDT
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By Louise Egan

OTTAWA (Reuters) - Canada's economy bounced back from a year-end slump in January thanks to factories, mines and the return of professional ice hockey, but growth still looks too weak to match the central bank's upbeat outlook and interest rates are unlikely to budge until 2014.

Gross domestic product expanded by 0.2 percent in the month, Statistics Canada said on Thursday, following the weakest two quarters since the 2008-09 recession and a 0.2 percent contraction in December.

A comeback in the manufacturing sector helped spark the turnaround, along with strength in the mining and energy sectors and the delayed start of the country's beloved hockey season after National Hockey League players and owners settled a months-long labor dispute.

The data suggests the economy is starting the year on a more solid footing after disappointing 0.6 percent annualized growth in the fourth quarter.

But economists are betting the first quarter will fall far short of the central bank's projected 2.3 percent growth.

"Once the darling of advanced economies, Canadian economic growth is expected to converge to be more in line with its peers," said Mazen Issa, macro strategist at TD Securities.

Canada recovered much more quickly from the 2008-09 recession than did the United States and others but has been spinning its wheels for several months as exports and manufacturing sputtered.

That has forced the Bank of Canada to acknowledge there is more slack in the economy than it had anticipated. As a result, it has gradually softened its talk of an interest rate increase, and this month said rates will remain on hold "for a period of time".   Continued...

A pedestrian walks past the head offices of Laurentian Bank in Montreal, March 19, 2013. REUTERS/Christinne Muschi