Economic growth speeds up in first quarter

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TAVIA GRANT
Globe and Mail Update
Last updated Monday, May. 30, 2011 9:09AM EDT

The Canadian economy grew at the fastest pace in a year in the first quarter as increased activity in manufacturing and business investment outweighed faltering consumer spending.

The country’s gross domestic product expanded 3.9 per cent annualized, up from 3.1 per cent in the fourth quarter of last year, Statistics Canada said Monday, outstripping the 1.8-per-cent pace in the United States.

Broad gains fuelled the growth, led by the goods-producing side of the economy. Goods production – including factories, mining and energy – grew 1.8 per cent while the services side increased 0.7 per cent. Business investment rose for the fifth quarter in a row, suggesting firms are taking advantage of the strong Canadian dollar to invest in productivity-enhancing machinery and equipment.

The report comes a day after Finance Minister Jim Flaherty said in a television interview that he’s “quite worried” about the possibility of another global recession, and one day before the Bank of Canada is expected to hold its key lending rate steady again.

Business investment grew 3.2 per cent as investments in machinery and equipment rose 3.7 per cent, the agency said.

All major industrial sectors, except for retail trade and arts along with entertainment and recreation, increased their output in the quarter. Construction, transportation and wholesale trade were strong, while consumer spending was flat.

On a monthly basis, the economy grew 0.3 per cent in March, a notch above economists’ estimates and led by factory growth. Economists polled by Bloomberg had pegged first-quarter growth at 4 per cent.

Fourth-quarter growth was revised down, to 3.1 per cent from an originally reported 3.3 per cent.