The Canadian economy grew by a better-than-expected 0.5 per cent in January, rebounding from December's weather-induced shrinkage.

Many economists were expecting to see growth of between 0.3 and 0.4 per cent, even though January had a few of its own nasty weather surprises. GDP fell 0.5 per cent in December. 

'It provides us confidence that the weakness was temporary' - RBC economist Paul Ferley

Manufacturing, mining and oil and gas extraction, retail and construction led January's turnaround, Statistics Canada said. Agriculture, forestry and utilities were the only sectors to register month-over-month declines.

Manufacturing's rebound was particularly robust, growing by 2.0 per cent in January — fully reversing December's 1.9 per cent slide.

"It provides us confidence that the weakness was temporary," RBC economist Paul Ferley told CBC News. "That's a big issue when you see a big drop. Our view is that it was temporary and the Canadian economy would bounce back and this number sort of confirms it.​"

But some analysts noted that higher GDP did not translate into more jobs on Canadian payrolls.  

"Although output bounced back to even, this rising tide did not lift workers’ boats," said Erin Weir, an economist with the United Steelworkers union.

Weir pointed out that Statistics Canada also reported today that employers cut the number of employees on their Canadian payrolls by 7,000 between December and January. 

Total wage growth rises

In a separate report, Statistics Canada said wage growth was at its highest level in 16 months. Average weekly earnings, including overtime, were up 3.0 per cent year-over-year in January, led by Alberta's 5.1 per cent gain.

"While no one would mistake growth for being robust, it does look sturdy enough to top the economy’s two per cent potential growth rate this year," said BMO Capital Markets chief economist Douglas Porter in a morning commentary. "The uptick in wages is an added bonus for the outlook."   

Some analysts are predicting that the second quarter, which begins tomorrow, should bring better economic news. "The U.S. economy appears to be recovering from its brutal winter, and a pick-up in U.S. momentum will likely help boost Canadian exports," said TD Bank economist Diana Petramala.. 

For the year as a whole, StatsCan said GDP was 2.5 per cent higher than the previous January.  

With a file from Havard Gould