Canada economy tops fourth-quarter expectations, central bank seen staying cautious

Household consumption also drove growth in the fourth quarter, climbing an annualized 2.6 per cent as consumers continued to spend.

Canada's economy grew at a faster pace than anticipated in the final quarter of 2016, lifted by consumer spending and a drop in imports, though the strong figures were seen as unlikely to prod the central bank to soon modify interest rates.

He noted the rise in household spending was connected to another fourth-quarter data point that snuck up on economists: a surge in employee compensation.

Export growth slowed in the quarter, while imports fell.

Weakness in the energy sector resulted in lower business investment, which posted a double-digit (-10.7 percent) decline for a second consecutive year.

Driven by household expenditures, much of this growth occurred in the first half of the year, said Statistics Canada. Meanwhile, the US's grew 1.9% during the same quarter.

The agency puts the improvement in gross domestic product at 0.6% or 2.6% at an annualized rate - and better than economists expected.

Canada's solid late-2016 performance even led to an upward revision to third-quarter real GDP, which was bumped up to 3.8 per cent from 3.5 per cent.

For all of 2016, GDP rose 1.4 percent, up from 0.9 percent the previous year.

  • Carolyn Briggs