After winter of economic freeze, sales are hot

OTTAWA The Canadian economy appears to be rebounding strongly from its winter blues, so much so that analysts are revising their estimate for growth this quarter and possibly for the entire year.

Following December’s weatherinduced collapse that brought a depressing 0.5 per cent dip in economic activity, the expectation was that it would take at least until the second quarter — the April-June period — to see a significant reversal.

But new data, including Tuesday’s bigger-than-expected 1.1 per cent jump in the wholesale sector for February, and last week’s eyepopping manufacturing numbers — February sales up 1.4 per cent, unfilled orders up 16.5 per cent and new orders up 18.8 per cent — even had bearish economist Derek Holt of Scotiabank asking if the economy had gone “vertical.”

His answer was no, in part because he thought other sectors of the economy are not doing as well and some of the numbers were just too big to be true. But Holt admitted it was impressive.

CIBC chief economist Avery Shenfeld believes the new indicators are strong enough to question the Bank of Canada’s most recent estimate of 1.5 per cent growth for the first quarter, especially if retail sales show strength in Wednesday’s report.

“All told, a healthy report, but not yet a sign of a take-off as, in volume terms, we’re still below the peak set in late 2013,” he said. “(Still), assuming March is a reasonable month, the economy looks to be tracking a few decimal places better than the Bank of Canada’s forecast.”

That’s far from what was initially expected of the first three months of the year, given the limp handoff from December. In January, many economists projected a growth rate barely touching one per cent, with the more pronounced rebound occurring in the second quarter.

A stronger-than-expected start to the year could also carry forward to the bank’s call for a 2.3 per cent pace for the year as a whole.

The motor vehicle and parts subsector led the February increases, rising 3.0 per cent to $8.4 billion following two consecutive monthly declines. The motor vehicle industry, with sales up 4.7 per cent, accounted for most of the increase.