Canada’s economy expanded at an annual pace of nearly four per cent in the first quarter, more than three times the growth seen in the U.S. in the same period.
According to Statistics Canada, the total value of all goods and services sold in Canada grew in absolute terms by 0.9 per cent from the level seen at the end of 2016. But that’s an annualized pace of 3.7 per cent.
The showing, while strong, was less than the 3.9 per cent annual pace of growth that economists had been expecting.
Domestic demand led the way in terms of growth, while exports were lower.
Speaking to reporters in Ottawa on Wednesday, the International Monetary Fund’s mission chief for Canada, Cheng Hoon Lim, called the quarterly growth figure “very robust” and “an impressive achievement” given the current pace of growth in other developed economies.
Impact of housing market
But part of the reason the economy was booming to open up 2017 was the disproportionate impact of Canada’s high-priced housing market.
Business investment in residential structures grew 3.7 per cent, new construction increased 3.9 per cent and renovation activity increased 2.1 per cent.
“The Canadian economy continues to outperform against relatively modest expectations, but remains far too reliant on the housing sector to power growth,” Cambridge Global Payments foreign exchange strategist Karl Schamotta said of the data.
Economist Frances Donald at Manulife Asset Management shares the concern that economic expansion so heavily tied to the housing market can’t go on forever.
“It’s not sustainable and everybody knows it,” she said. “That sugar water is not the long-term, stable growth driver Canada needs, and is more likely to provide a headwind into the second half of the year than act as an ongoing pillar to growth.”