OTTAWA - The economy picked up steam in the first three months of this year, driven by consumer spending, a turnaround in business investment and the housing market, Statistics Canada said Wednesday.
Canada's real gross domestic product grew at an annualized rate of 3.7 per cent in the first quarter in a broad-based expansion.
Business investment in residential structures rose 3.7 per cent, boosted by new construction, the strong real estate market in Ontario and a gain in renovation activity.
After falling in four of the previous five quarters, investment in machinery and equipment advanced 5.8 per cent. Household final consumption increased 1.1 per cent, led by vehicle purchases.
Despite the increase in the pace of growth, it was below expectations. Economists had estimated annualized growth of 3.9 per cent, according to Thomson Reuters.
TD Bank senior economist Brian DePratto said while the economy roared ahead in the quarter, he pointed to issues lurking beneath the surface, including evidence that housing markets are beginning to cool off.
"At the same time, the environment for business investment should remain supportive, but elevated uncertainty is likely to cap the pace of growth," he said in an analyst note.
"Finally, consumers are likely to keep their wallets open, helped by past gains in housing wealth. But, it is again unlikely that the pace of first quarter growth, particularly for durable goods spending, can be maintained, and the credit-fuelled nature of recent spending growth remains concerning."
Growth in March was stronger than expected, with GDP growing 0.5 per cent, above estimates of 0.2 per cent. Goods-producing industries climbed 0.9 per cent, while service industries added 0.3 per cent.
Overall annualized growth figures for the second half of 2016 were also revised higher Wednesday. The figures for third and fourth quarters were increased to 4.2 per cent and 2.7 per cent compared to earlier readings of 3.8 per cent and 2.6 per cent, respectively.
In a separate report Wednesday, the International Monetary Fund said the Canadian economy has regained momentum, but noted that complex adjustments "are still at play."
The IMF said business investment remains weak, non-energy exports have underperformed and housing market imbalances have risen.
It suggested a further tightening of tax-based measures to mitigate speculative investment in the housing sector and called for greater co-ordination between federal and provincial regulators.