-David Tulk, chief macro strategist at Toronto-Dominion Bank's TD Securities
An increase in oil exports to the U.S. has boosted Canada's economy in the first quarter of this year, even as domestic demand expanded at the slowest pace since the 2009 recession. The nation's economic output grew at a 2.5% annualized pace during the January-March period, accelerating from a 0.9% growth in the fourth quarter of 2012 and outpacing analysts' expectations of 2.3% expansion. At the same time, the three-month period registered a 0.2% increase in output in March.
The report also showed that Canadian oil producers increased their shipments to the world's largest economy, by using advantage of new pipeline capacity. Crude oil export surged 8.2% to a record high in the quarter, while shipments of natural gas rocketed 9.7% over the same period. As the economy is performing better than expected the Bank of Canada receives more scope to maintain its tightening bias and do not concern about the impact of their actions on domestic spending.
During the latest monthly policy meeting a Governor of the Bank of Canada Mark Carney kept the main interest rate unchanged and noticed that tighter policy may be needed soon as the economic expansion progresses.
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