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MNI (Ottawa)
OTTAWA (MNI)

Canada's gross domestic product showed unexpected strength with a 0.5% flash estimate for January and a faster-than-expected 9.6% annualized gain in the fourth quarter, government figures showed Tuesday.

The January GDP gain was led by wholesale, manufacturing and construction while retail sales fell, Statistics Canada said. While the official December figure came in at 0.1% to lag economist predictions for 0.3%, November was revised up to 0.8% from 0.6%. Economists and the central bank have said the economy could shrink in the first quarter because of second-wave Covid-19 lockdowns that took hold around the end of last year and were just being lifted in the last few weeks.

Fourth-quarter GDP was also faster than economist predictions for a 7.5% annualized increase. Business inventories helped lead growth, adding about CAD38 billion in stockpiles after three quarters of drawdowns, and the expansion was also boosted by weaker imports. Business investment advanced at an 11% annualized pace, while consumer spending slipped 0.4% following a 63% gain in the third quarter following last spring's lockdown.

There are also signs consumer spending could surge when vaccines allow consumers to make regular store visits. Boosted by government relief payouts, the household savings rate remained in the double digits for a third quarter at 12.7%.

GDP shrank 4.5% last year, the steepest drop in records back to 1961. Monthly GDP showed the economy remains 3% below its pre-pandemic level.

MNI Ottawa Bureau | +1 613-314-9647 | greg.quinn@marketnews.com