Canada sees modest growth, rates likely on pause

Fri Jun 1, 2012 11:22am EDT
 
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By Louise Egan

OTTAWA (Reuters) - Canada's economy grew at a lackluster pace in the first quarter, and expanded by much less than expected in March, suggesting the central bank will be in no rush to follow through on a warning it could raise interest rates.

Gross domestic product (GDP) expanded 1.9 percent in the quarter on an annualized basis, Statistics Canada said on Friday, in line with market forecasts for the quarter, but below the central bank's most recent projection of 2.5 percent growth.

The growth matched the economy's fourth-quarter performance, which was revised up from 1.8 percent, as well as first-quarter growth in the United States.

But GDP rose just 0.1 percent in March, below the 0.4 percent gain that analysts had expected, and following a 0.2 percent contraction in February.

The report shows an economy that is gradually healing, but not as quickly as many hoped, said David Tulk, chief macro strategist at TD Securities.

"Canada is plodding along," he said. "It is closer along the road to recovery than any other developed market economies, but ultimately we need to be prepared for perhaps additional weakness as some of the confidence hit from Europe begins to affect Canada's domestic economy."

Following the 2008-09 recession, Canada recovered more quickly than the United States and Europe and recouped all the jobs lost by January 2011.

But the economy has lost much of its shine in recent months, with the exception of massive jobs gains in March and April that exceeded all expectations.   Continued...