Reuters - April 30, 2010
Canada's economy grew by a healthy 0.3 percent in February, its sixth consecutive monthly increase, in another sign the recovery from last year's recession is holding firm. The figures show the economy is in line to meet the Bank of Canada's forecast for 5.7-percent annualized growth in the first quarter of 2010. First-quarter figures are due next month. "The initial stages of Canada's recovery were simply much, much more impressive than almost anyone expected," said Douglas Porter, deputy chief economist at BMO Capital Markets. The increase matched analysts' expectations.

Even the hard-hit manufacturing sector grew by 1.2 percent on higher production of durables and nondurables, Statistics Canada said on Friday.  Manufacturers have been particularly hurt by the crisis, coupled with a strong Canadian dollar and weak U.S. markets, which squeezed exports. "Overall, this was a fairly favorable report as it suggests that the Canadian economy has continued to grow a respectable pace," said Millan Mulraine of TD Securities.

The news did little to influence the Canadian dollar. At 11:45 a.m. ET, it was at $1.0127 to the U.S. dollar, or 98.75 US cents, down from $1.0054 to the U.S. dollar just before the release of the GDP data.

The Bank of Canada last week removed a conditional promise to keep rates at record lows until the end of June. Virtually all Canada's primary dealers expect the central bank to announce a 25 basis points rate hike on June 1.  "The economy appears to have strengthened further early this year... Growth at this pace implies diminishing need for the highly stimulative monetary conditions currently in place," said Paul Ferley of RBC Economics Research.

Statscan said the Winter Olympics, held in Vancouver in the second half of February, helped performing arts and services like hotels, as well as radio and television broadcasting. Oil and gas extraction fell by 1.8 percent, in part because two fires at oil facilities have cut output since December. Overall the mining sector grew by 0.4 percent.

BMO's Porter said the growth rate would likely moderate in coming months as the housing market cooled and the stronger Canadian dollar started to bite.

Statscan also said industrial product prices dropped by 0.4 percent in March from February, mainly as the Canadian dollar strengthened against its U.S. counterpart. Raw materials prices increased by 0.8 percent in the month.

Separately, Ottawa said on Friday it ran a budget deficit of $902 million in February, the second smallest on a monthly basis in a year. The latest numbers suggest the deficit for the full year will be below the government's estimated $53.8 billion.