Canada's economy expands at 2.9% pace, beating forecasts

Canada's economy expanded an an annualized pace of 2.9 per cent in the last three months of the year, Statistics Canada reported Friday.

Fourth quarter of 2013 ended on a down note, but economic growth strong overall

Canada's manufacturing sector picked up its pace of expansion in the fourth quarter. (Norm Betts/Bloomberg)

Canada's economy expanded an an annualized pace of 2.9 per cent in the last three months of 2013, Statistics Canada reported Friday.

That was better than the downward-revised pace of 2.4 per cent seen in the U.S. over the same period. It was also better than the 2.5 per cent growth rate that analysts had been expecting.

The gains were broad-based, as most industrial sectors showed expansion. Mining, oil and gas, manufacturing and the public sector all grew.

Loonie rises

For 2013 as a whole, the Canadian economy grew by two per cent.

That's about three-tenths of a percentage point higher than predicted by the Bank of Canada and the latest federal budget. It also makes 2013 the best year for the Canadian economy since 2011.

"Overall, the fourth quarter economic performance was a healthy showing for Canada," TD Bank said in a note following the data's release. "The headline growth rate also confirms something we've long recognized: the second half of 2013 was much stronger than the first half."

The strong figures were good news for the hard-hit Canadian dollar, which gained about a quarter of a cent after the data's release to trade at 90.15 cents US.

The year ended on a down note, however. Bitterly cold weather all month and a massive ice storm toward the end of December dragged the economy down, as factories, retailers and some government activities temporarily closed or operated at less-than-peak productivity. 

On a monthly basis, the Canadian economy shrank by 0.5 per cent in December. That's the worst monthly figure seen since the recession.

"Broadly speaking, the general message of a decent quarter ending on a soft note remains intact as weather … hit December figures negatively," Scotiabank economist Derek Holt said. "We expect December softness to result in deferred activity into … spring."

In revisions that helped the annual growth number, Statistics Canada said the economy had advanced by 2.9 per cent and 2.2 per cent respectively in the first and second quarters of 2013. It had previously recorded those growth rates as 2.3 and 1.6 per cent. The 2.7 per cent rate in the third quarter was left unchanged.