(Adds analyst comments, updates market)
By Leah Schnurr
OTTAWA, March 2 Canada's economy grew at a
faster pace than anticipated in the final quarter of 2016,
lifted by consumer spending and a drop in imports, but the
strong performance is not expected to prod the central bank to
change its cautious stance on interest rates.
Gross domestic product grew at an annualized 2.6 percent
rate in the fourth quarter, Statistics Canada said on Thursday,
beating economists' forecasts for 2 percent growth.
While that marked a slowdown from an upwardly revised 3.8
percent rate of expansion in the third quarter, the economy grew
by 0.3 percent in December, boding well for the transition into
Other aspects of Canada's economic health were not as strong
as the overall growth figure suggested, with an increase in net
trade contributing to growth. Although exports rose just 1.3
percent on an annualized basis, imports slumped, giving back
temporary third-quarter gains due to a shipment for an East
Coast oil project.
The pullback also weighed on business investment. However,
consumers continued to show resiliency as household consumption
climbed 2.6 percent and economists were generally encouraged by
the overall growth.
"The details were messy, but it was a solid quarter for the
Canadian economy," said Nick Exarhos, an economist at CIBC.
While economic growth surpassed the Bank of Canada's 1.5
percent forecast, economists said it was unlikely to alter the
central bank's cautious stance after it downplayed recent
positive data on Wednesday. The bank left interest rates at 0.50
"The Bank of Canada is worried about a number of uncertain
factors, especially what happens with economic policy in the
U.S.," said Jimmy Jean, senior economist at Desjardins.
"I think they will keep, all things considered, a very
The Canadian dollar strengthened against the greenback but
soon reversed course to trade at C$1.3388, or 74.69 U.S. cents.
There were also signs that efforts to stimulate the economy
were kicking in as government investment rose. The Liberal Party
made reinvigorating the economy a major part of its successful
2015 election campaign and has allocated billions to
The economy grew 1.4 percent in 2016, also better than
forecast as growth picked up from a weak 2015 that was
punctuated by a brief recession.
The strong end to 2016 prompted BMO to raise its 2017 growth
forecast to 2.3 percent from 2.0 percent.
"The evidence continues to mount that the growth landscape
is shifting for the better," said Doug Porter, BMO's chief
(Reporting by Leah Schnurr; Additional reporting by Susan
Taylor and John Tilak in Toronto; Editing by W Simon and Paul