WRAPUP 1-Canada recovery increasing pace, latest data shows

* Manufacturing shipments rise for fifth month in a row

* Labor productivity logs best growth rate since 1998

* Data suggests recovery taking root, economists say

By David Ljunggren

OTTAWA, March 16 (BestGrowthStock) – Canada’s economic recovery is
picking up pace with January manufacturing sales higher than
expected and labor productivity rising for the first time in
more than a year, official data showed on Tuesday.

Analysts enthused about the figures, saying it showed
Canada was well over the worst of the recession.

“We saw a pair of very encouraging reports spill out of
Statistics Canada today, which together suggest that the
recovery is deepening and taking on a healthier glow,” said
Douglas Porter of BMO Capital Markets Economics.

The minority Conservative government has so far taken a
more cautious line, stating repeatedly that the recovery is
still fragile and the jobless rate is too high.

Ottawa is also keeping a close eye on the strengthening
Canadian dollar, which manufacturers say makes it harder for
them to sell their goods.

Statscan said the value of manufacturing shipments rose by
2.4 percent in January from December, the fifth consecutive
monthly increase. Analysts had predicted a 0.5 percent rise.

“This is undoubtedly a very strong report, and it suggests
that the manufacturing sector is continuing to fire on all
cylinders, defying the adverse impact of the strong Canadian
dollar and the weak U.S. economy,” said Millan Mulraine of TD

Labor productivity rose 1.4 percent in the fourth quarter
of 2009, the first increase in more than a year and the highest
quarterly growth rate for almost 12 years.

Analysts had on average predicted productivity would
increase by 0.8 percent.

“Given Canada’s dismal productivity over the past few
decades, strength on this front is welcome,” said Derek Holt
and Karen Cordes Woods of Scotia Capital Economics.

The data helped push up the Canadian dollar, which briefly
hit a new 2010 high of C$1.0153 to the U.S. dollar, or 98.49
U.S. cents. It had closed at C$1.0197 to the U.S. dollar, or
98.07 U.S. cents, on Monday.

Yields on overnight index swaps, which trade based on
expectations for the Bank of Canada’s key interest rate, edged
higher on Tuesday, showing the market saw credit tightening by
the central bank as slightly more likely than on Monday.

The market suggests central bank interest rates will rise
to 0.50 percent in July from the current 0.25 percent and will
end the year at 1 percent.

The Bank of Canada has promised to keep the rate steady
until the end of the second quarter on the condition that
inflation does not pose too much of a threat.

Paul Ferley, assistant chief economist at RBC Economics
Research, said “the continuing high, though moderating,
unemployment rate is expected to keep inflation low, which will
allow any tightening to be undertaken at a gradual pace”.

Stock Market Analysis

(Reporting by David Ljunggren; editing by Peter Galloway)

WRAPUP 1-Canada recovery increasing pace, latest data shows