The Canadian economy was seen rising 0.4% on the month in the month of February, data from Statistics Canada showed last week. The better than expected GDP growth signaled that the first quarter growth outperformed the BoC's forecast for the same period. The GDP growth was seen to be better than the forecasts which estimated that GDP growth increased 0.3% on the month.

On an annualized basis, the first quarter GDP growth for Canada was higher than the estimated 1.6% increase even if the monthly GDP report had shown a flat change. The Bank of Canada forecast that first-quarter GDP growth would rise 1.3%.

Canada GDP Growth Rate: 0.4%, m/m (Source: Tradingeconomics.com)

The central bank was seen raising interest rates three times in a row since July last year amid an uptick in business activity and faster than expected increase in inflation. The BoC had left interest rates unchanged at the meeting last month but left the door open to further rate hikes which would be data dependent.

The GDP data showed that that good producing sector had advanced 1.2% with a pickup in mining, oil and gas adding to the gains. Previously the sector had declined following unscheduled maintenance shutdowns.

Extraction from the oil sands was seen rising as production advanced 3% after a flat reading in February. Nearly fifteen out of the 20 industrial sectors noted higher activity in February.

The increase in the GDP showed broad-based advances in key sectors that included manufacturing. The Canadian economy was experiencing a slowdown in the second half of last year but the recent data suggested that growth will advance above the BoC's 2% forecast in the coming months.

The better than expected GDP data also suggests that the Bank of Canada would continue with its rate hike that it had signaled just last month. The central bank forecast that the first quarter GDP growth would advance 1.3% while the second quarter GDP is expected to accelerate to 2.5% and average at a pace of 2.0% for the year 2018.