Economy grows at 3.7% in Q1, fuelled by household spending, business investment

"I still believe the second quarter is going to show quite a marked slowdown from the solid pace in the first quarter, but I will say the March number is impressive as a stand-alone result". There was strong investment growth in the housing sector, although a significant proportion of this growth related to ownership transfer costs.

And TD Bank senior economist Brian DePratto said there are issues lurking beneath the surface, including evidence that housing markets are beginning to cool off.

While the first-quarter expansion was shy of the Bank of Canada's 3.8 percent forecast, it made Canada a growth leader among its industrialized peers at the start of the year. "A lot of other countries would like to be in this position".

However, Porter noted that exports were an area of key weakness in the GDP report.

Monthly GDP rose a stronger-than-expected 0.5% in March, pointing to strong momentum through the end of the quarter.

Holt said the strong numbers bring the central bank slightly closer to an eventual interest rate hike.

The growth included increases in drilling and rigging services, Statistics Canada said. Global confidence in Canada is lukewarm, judging by lackluster returns on Canadian equities and continued weakness in the Canadian dollar, said Frances Donald, economist at Manulife Asset Management.

Business investment picked up after declining in four of the past five quarters, with companies spending more on industrial machinery and equipment, and computers. Market expectations were for a 4.2% advance, according to economists at Royal Bank of Canada. Goods exports were unchanged. Household final consumption increased 1.1 per cent, led by vehicle purchases.

The implicit price deflator declined to 1.0% from a revised 1.1% previously while there was a slowdown in earnings growth and a decline in the savings rate.

  • Zachary Reyes