Canada Manufacturing and Real Estate Expands

Canada’s economy showed unexpected strength in April with output edging higher on a sharp pick up in manufacturing and a rebounding real estate sector.

Gross domestic product expanded 0.1% from March, Statistics Canada reported Friday in Ottawa, compared with economist expectations for a flat reading, Bloomberg reported.

The report marks a third consecutive month of gains and should provide some relief to analysts saying the economy was struggling after a run of disappointing data in recent weeks.

After slumping in the early part of the year, the economy seems to be firmly on track for growth to accelerate—at least in the second quarter—to beyond 2%, which should reinforce expectations the Bank of Canada will proceed with interest-rate increases in the second half of this year.

Canada’s economy is coming off a run of three consecutive quarters of disappointing growth readings of below 2%.

Manufacturing was up 0.8% in April, which may be the biggest surprise given earlier factory sales data showed sharp declines during the month. Statistics Canada reconciled the discrepancy by saying much of the production ended up as inventory, which suggests a correction may be in store for the sector as those inventories get wound down. Both durable and non-durable manufacturing posted gains.

The real estate sector—which has struggled amid a slumping housing market—continues to show signs of stabilization. Real estate agent and broker activity was up 0.5% during the month, the biggest gain since tighter mortgage regulations were implemented at the start of the year.

Unseasonably cold weather in April also had an impact on the numbers, in both directions. It helped activity at utilities, which saw a 1.6% gain during the month, but hurt retail activity, which was down 1.3%.

Transportation and warehousing services were down, led by a 2.3% drop in rail transportation, in part due to fewer car loadings of manufactured products.

Oil and gas extraction also showed surprising strength, up 0.6%, driven by higher output of conventional crude. Oil sands output was down 0.1% due to maintenance of some facilities.

Mining excluding oil and gas dropped 9.1%, with Statistics Canada citing a labor disruption in iron ore mining. Construction was down 0.5% in April, the largest decline in a year.