– February 2013 GDP came in at a stronger than expected 0.3% following an upwardly revised 0.3% gain in January.
– Strength in the month was led by good-producing industries with a 0.9% jump in activity and was helped by solid gains in mining, manufacturing, and agriculture.
– Activity in service-producing industries rose a negligible 0.1%.
February 2013 GDP rose a robust 0.3%, which was stronger than the 0.2% gain expected. As well, the January monthly increase was revised upward to 0.3% from a previously estimated 0.2% gain. The revision largely reflected a sizeable upward revision to growth in the retail trade sector to 1.3% from the previously estimated 0.1% increase.
Strength in February was largely concentrated in the goods-producing industries where output jumped 0.9% in the month and built further on a 0.3% gain in January. Within the goods sector, the strength was led by gains in mining (2.2%), manufacturing (0.8%), and agriculture (0.5%). The mining component was helped by a 21.9% surge in potash production in the month.
Service-producing industries saw a negligible increase of just 0.1% although this followed a stronger 0.3% rise in January. The increase was restrained by a 0.2% drop in wholesale trade and a modest 0.1% rise in retail trade although both followed relatively strong gains in January.
The back-to-back gains in monthly GDP are consistent with our forecast of a strengthening in the first-quarter 2013 annualized growth to 1.9% relative to disappointing gains in the fourth and third quarters of last year of 0.6% and 0.7%, respectively. Although this monitoring suggests a rate of increase slightly greater than the 1.5% projected by the Bank of Canada in its latest forecast update released April 17, it is still not sufficient to put downward pressure on the unemployment rate. With inflation continuing to run below the central bank’s mid-range target of 2%, policy is expected to remain highly accommodative in order to engender greater momentum in growth going forward. Our expectation remains that any hike in the overnight rate is not likely until the middle of next year.
RBC