Economy seen growing 4 percent in first quarter

Mon May 30, 2011 8:14am EDT
 
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* What: Statistics Canada releases Q1 GDP

* When: Monday May 30 at 8:30 a.m.

FACTORS TO WATCH:

CONTEXT - The economy is expected to bounce back in March after it contracted in February for the first time since last September, rounding off a strong first quarter overall.

If forecasts are accurate, annualized quarterly growth would be the strongest since the 5.5 percent rate in the first quarter of 2010. That was the fastest growth in more than a decade and the data was released the day before the Bank of Canada's first interest rate hike following the global financial crisis.

History is not expected to repeat itself, however, and this time analysts expect the central bank to be unswayed by data showing strong growth, saying it will hold its key rate steady on its policy-announcement date on Tuesday because of signals that the economy will be less robust for the rest of the year.

DRIVERS OF GROWTH - Business investment is seen as a key source of growth in the quarter, particularly as wholesalers and manufacturers replenished inventories after strong demand in the fourth quarter.

Consumer spending contributed less to growth than in previous quarters, analysts say, as expected.

Exports were strong but will nonetheless be a net drag on growth because imports outpaced them.   Continued...