Economy grows at 3.7% in Q1, fuelled by household spending, business investment

Housing construction was a major boost for Canada's economy in the first quarter of 2017

Statistics Canada said real gross domestic product grew at an annualized rate of 3.7 per cent in the first quarter in a broad-based expansion.

Bottom line: The buzz on Bay Street before the latest GDP numbers was that the annual growth rate might have been faster than 4 per cent in the first quarter.

The economic growth outpaced that of the United States, which grew at 1.2 percent in the same quarter.

StatsCan raised its growth estimates for the previous two quarters, to 2.7 per cent and 4.1 per cent, respectively, suggesting Canada is experiencing its strongest stretch of economic growth since at least 2013.That's welcome news, but one month doesn't make a trend: Canada's economy sputtered for much of 2015 and 2016, posting small quarterly declines in three of six quarters through the second half of a year ago.

"These are big gains in business investment and they are a long time coming given the underperformance during the oil-price shock", said Eric Lascelles, chief economist at RBC Global Asset Management.

However, growth in March was stronger than expected. "If both real and nominal GDP are growing strongly it indicates underlying spending power in the economy".

A new forecast from ratings agency Moody's predicts Canada's growth for all of 2017 will come in at around 2.2 per cent, behind the USA and second-best among G7 countries.

"We've now had three quarters in a row of quite solid activity in Canada, so this is not a flash in the pan by any means". Economists had estimated the growth rate for the quarter would be 3.9 per cent, according to Thomson Reuters.

Overall annualized growth figures for the second half of 2016 were also revised higher Wednesday.

"It wasn't really far from broad expectations, but I would say at the margin, it's mildly supportive for the Canadian dollar and slightly moves us another step towards the Bank of Canada raising rates". Economists and officials at the central bank expect economic activity to moderate in the current quarter, and post growth of 2.6% this year.

Some market watchers urged caution, though.

"Until there is a pronounced lifting of uncertainties, Canadian fundamentals will continue to take a back-seat to other, more powerful drivers of sentiment", she said.

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