Canada economy grew 3.1% in first quarter

OTTAWA — The Canadian economy grew by 3.1 per cent in the first quarter at an annual rate, in a third consecutive quarterly gain, according to figures released on Tuesday by the government statistical agency.

The growth, led by higher business investment and household consumption, came in well below analysts' expectations — dragged down by a drop in export volumes, after two strong quarters.

The second quarter, meanwhile, "looks to have begun on a solid note," Desjardins analyst Royce Mendes said in a research note. 

That should be enough for the Bank of Canada to continue raising rates by as much as 50 basis points on Wednesday and again by another 50 basis points next month, from record lows.

"The economy is overheating and the policy rate is still too low," Mendes said. "It's time for monetary policy to normalise."

According to Statistics Canada, accommodation and food services, as well as arts, entertainment and recreation segments recorded declines in the first three months of 2022 despite gains in February and March as COVID-19 restrictions were loosened.

Transportation and warehousing posted a slight increase as travel restrictions were lifted.

Goods-producing sectors, specifically construction, manufacturing and agriculture, forestry, fishing and hunting, were among the largest contributors to growth in the quarter.

Residential building construction also rebounded. So too did agriculture, forestry, fishing and hunting, following a poor harvest last year that was due to record-setting heat, drought and forest fires in Western Canada.

Those gains were partially offset by declines in several client-facing service industries that saw lockdowns in January aimed at curbing the spread of the COVID-19 Omicron variant.

Oil sands production in Alberta province also fell, as colder than usual temperatures, COVID-19 outbreaks, limited personnel and maintenance activities affected production.