TORONTO – An improvement in Canada’s economy during the first month of the year left investors with a momentary sense of optimism, but the sheen quickly wore off the loonie.
The Canadian dollar ended at 90.46 cents US on Monday, ahead only 0.04 of a cent, after climbing nearly half a cent earlier in the day.
The short-lived jump followed a report from Statistics Canada that showed the economy grew by 0.5 per cent in January. The figure was above the 0.3 per cent prediction from economists, and marked an improvement from December when there was a 0.5 per cent decline.
Some economists pointed out that January’s increase only recovered the GDP decline posted in December when bad weather slammed much of the country, and it wasn’t reason to celebrate.
“Major swings in the last two months have overshadowed the disturbing fact that the Canadian economy’s average growth has been practically non-existent since November,” said Desjardins senior economist Benoit Durocher in a note.
“Since January’s increase only recovered the ground lost in December, the carryover for the first quarter of 2014 is nearly zero.”
Subdued enthusiasm for the economy is reflected in the loonie, which has tumbled about four per cent since the start of the year.
“The Canadian economy had a bit more energy than expected at the start of the year, managing to rebound nicely from the December ice storm as well as braving the unusual cold in January,” said Bank of Montreal chief economist Doug Porter in a note.
“While no one would mistake growth for being robust, it does look sturdy enough to top the economy’s two per cent potential growth rate this year.”
In commodities, the May crude oil contract fell nine cents to settle at $101.58, with the TSX energy sector 0.7 per cent higher.
Gold stocks were the biggest decliner as June bullion fell $10.50 to end the day at US$1,283.80 an ounce. May copper slipped 1.5 cents to US$3.03 a pound.