Canada's economy heated up in January

The Canadian economy continued its red-hot recovery asgross domestic productgrew in January at an annual rate ofmorethan six per cent, Statistics Canada saidWednesday.

Canada's GDP expanded by 0.6 per cent in the first month of 2010, comparedwith December 2009.

"Real gross domestic product advanced 0.6 per centin January, a fifth consecutive monthly increase," Statistics Canada said.

Leading theeconomic charge were the country's manufacturingand constructionsectors.

Goods makers, who have seen output slump badly during the recent recession, hiked production 1.9 per cent in January,compared with December's output expansionof 1.2 per cent.

Canada's construction sector also posted good growth numbers, up 1.7 per cent.

Bragging rights

The federal government said the latest figures show Ottawa's stimulus programsare bearing financial fruit.

"It shows our plans for the economy are working.We're seeing strength across a number of sectors including retail and manufacturing," said Industry Minister Tony Clement after a caucus meeting in Ottawa.

And many economist are hitting the same positive note.

Doug Porter of BMO Economics estimated the country's economy has expanded at a rate in excess of five per cent for the past six months.

"Toputthatinperspective,thatsthefastestsix-month growth rate since early 2000(attheheightofthetechboom),toppinganythingseenduringthe commodityboomofthepastdecade," he said in a morning note on the GDP numbers.

Better than forecast

The stellar January showing builds upon a wave of good financialnews indicating a Canadian economy recovering far faster than many economistsimagined.

In February, the country added 60,000 new full-timejobs, compared with January. The total number was also up100,000from February 2009.

Statistics Canada'sGDP measurementusually lags both its monthly employment and inflation figures.

Honda Canada and General Motors Canada both recently announced they were expanding workforces in their automobile production facilities.

In addition, Lakeside Steel Inc. in Welland, Ont., said it is boosting its operations in anticipation of increased demand for its products.

Overall, improved housing starts and consumer spending and a rising stock market have analysts hiking their estimates of national economic growth.

For instance, in recent weeks CIBC's Avery Shenfeld boosted his forecast of 2010 GDP expansion by a full percentage point over earlier projections.

Indeed, many economists are looking for Canada's economy to grow at least 1.5 percentage points faster thanthe Bank of Canada's previous forecast.

Better thanothers

For many experts, the Canadian economy appears to be pulling away fromother industrialized countries in the race to recover for the recession of 2008-09.

Europe, for example, is postinga Februaryinflation rate that hit a two-year high and an unemploymentrate that is almost 1.5 percentage points higher than Canada's.

CIBC's Shenfeld now expects Canada to grow by 5.1 per cent in the first three months of 2010, more than double the Americanrate of 2.5 per cent. For all of 2010, the U.S.economy should grow by three per cent, slightly better than Canada's forecast 2.9 per cent, according to CIBC.

But Canada's 2010 jobless rate, forecast at 8.2 per cent, will belower than the U.S. rate of 10 per cent, CIBCpredicts.

Higher dollar

In response to the strong GDP results, international currency traders drove up the value of the Canadian dollar in Wednesday's trading.

The loonie hit 98.53 cents US in the morning session, a gain of almost half a cent versus Tuesday's close of 98.09 cents.

Wednesday's trading added to the currency's winning streak for 2010.

So far this year, the loonie has gained 24 per cent versus the American dollar and 21 per cent compared to the euro.