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Canadian wholesale trade volumes rose in March, providing further evidence of what appears to be stronger-than-expected first-quarter economic growth, while April data suggested the strength may persist.
Statistics Canada figures Wednesday showed that in dollar terms Canadian wholesalers regained in March only a fraction of the trade they lost in February, with sales climbing 0.1 percent as declines in several sectors offset partial gains in the auto sector.
But in volume terms, which is what counts for gross domestic product, sales rose 0.4 percent.
"Despite the headline disappointment in wholesale sales, today's release reinforces that the macro backdrop is very robust," said Mazen Issa, a strategist at TD Securities.
"First-quarter annualized real GDP is shaping up to be very strong—we are currently tracking a growth rate near 5 percent," he said.
The Bank of Canada projected 4.2-percent first-quarter growth in its latest report in April, followed by a sharp drop to 2 percent in the second quarter.
Economic performance in the April-June period had been expected to be dampened by disruptions in the auto sector caused by the Japanese earthquake as well by lower exports due to the strength of the Canadian dollar.
But, surprisingly, the composite leading indicator for April was lifted by strength in its manufacturing components, rising 0.8 percent versus the consensus forecast of a 0.6 percent gain.
"The leading indicator suggests that momentum from the first quarter will carry through into the second quarter, which is welcome given the soft patch we anticipate from supply disruptions in Japan," Issa said.
The numbers don't make life easier for Bank of Canada Governor Mark Carney, who must decide when to resume raising interest rates as he weighs high food and energy costs and a robust economy against the potential risk to the Canadian economy from U.S. and European deficit problems.
Most market players are keeping their rate hike bets very tentative, with July seen as a less certain date for the bank's next rate move than it was a few weeks ago.
After a long-standing forecast that the central bank will raise rates in July, TD Securities pushed back its rate forecast to September on Wednesday, citing its view that the bank "is far more concerned with the risks of fiscal contraction in the United States and a deceleration in growth across emerging market economies."