Bank Of Montreal
Bank Of Montreal

A string of stronger-than-expected reports are prompting some economists to revisit their forecasts for the strength of the recovery.

Some are now pencilling in higher forecasts after recent reports showed strength in manufacturing and wholesale trade, while retail sales continue to climb.

Bank of Montreal, for example, boosted its forecast for Canada’s first-quarter gross domestic product by a full percentage point, to 4.7 per cent from its earlier expectation of 3.7 per cent. It now believes the economy will grow 3.2 per cent this year, rather than the 3 per cent it had previously predicted.

“And that may not be the final word,” said deputy chief economist Douglas Porter in a note. “With the housing sector almost back to pre-recession highs, employment recouping almost 40 per cent of its recession losses and real retail spending and auto sales close to their highs, can we really call this a fragile recovery? It looks more and more V-shaped by the day.”

Canada’s economy powered back to life in the final quarter of last year, expanding by a better-than-expected 5 per cent thanks to the housing market, consumer spending and trade.

Royal Bank of Canada, too, believes the first quarter will show some heat. It had pegged growth at 3.8 per cent, but now has a “monitoring” forecast of more like 4.6 per cent.

“In early 2010, it looks like the strong momentum is being maintained and that strength does look fairly broadly based,” said assistant chief economist Paul Ferley in an interview.

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