Canada Economy Bounces Back in February

Canada’s economy rebounded more than economists forecast in February, a reassuring sign the nation is poised to emerge from a recent soft patch in growth.

Gross domestic product expanded 0.4% during the month following a 0.1% contraction in January, Statistics Canada reported Tuesday in Ottawa. Economists anticipated a 0.3% gain. The gains were due to idled oil and auto production coming back on line, Bloomberg reported.

The numbers showed broad-based increases in key sectors such as manufacturing and signs that rail bottlenecks may be dissipating, boding well for a pick-up in growth for the rest of the year. After a slowdown that began in the second half of last year, most economists are anticipating growth will return to above 2% pace in coming months and prompt the central bank to continue with rate increases.

“The Canadian economy hit a pothole to begin the year, but February’s GDP reading suggests that it was only a temporary bump in the road,” Royce Mendes, an economist at CIBC Capital Markets, said in a note to investors.

Most economists are forecasting the economy grew by less than 2% for a third straight quarter to start 2018. The Bank of Canada estimates first-quarter growth of 1.3%, before the expansion accelerates to 2.5% in the second quarter and 2% for all of 2018.

The Canadian dollar rose on the report, paring earlier losses. It was trading little changed at C$1.284 per US dollar.

Canada’s economy slowed down considerably in the second half of last year, and the slump deepened in January as the country suffered through rail disruptions and shutdowns in the oil and auto sectors. But February showed signs of a clear turnaround.

Extraction from the oil sands was up 3% as production returned to normal following shutdowns in January. But the gains went beyond oil. Fifteen of 20 industrial sectors recorded higher activity in February and excluding oil, GDP was up 0.3% for the month.

There are also signs the worst of the country’s rail issues may be over. Rail transportation edged down 0.1%, much better than the 3.4% decline in January.