Canadian economy expands at 3.1% pace in 2nd quarter

Canada's economy soared in the second quarter,to an annualized pace of 3.1 per cent, as households spent more, markingthe largest quarterly gain since the third quarter of 2011.

The jump in gross domestic product (GDP) was greaterthan the 2.7 per cent rate economists were expecting, andfollowssluggishgrowth to start the year, theeconomy's worst performance in more than a year.

The jump came as the agency updated its result for the first quarter to an annual pace of 0.9 per cent compared with an earlier reading of 1.2 per cent in the first three months of the year.

Statistics Canada said Friday thatreal GDP was up by 0.8 per cent during the quarter endedJune 30, compared toa 0.2 per cent increase in the first three months of 2014.

On a monthly basis, the economy grew in June by 0.3 per cent.

In a statement, Finance Minister Joe Oliver said the news is evidence the government's plan for the economy is working, and that "our unrelenting focus on jobs, growth and long-term prosperity is paying off for Canadians from coast to coast to coast."

Canadian dollar rises on GDP news

Statistics Canada said economic activity increased in all sectors except non-profit institutions serving households.

Consumers led the increase, with household consumption up by 0.9 per cent for the three-month period ended June 30.

Canadians spent 1.2 per cent more on goods in the second quarter, and 0.7 per cent more on services.

Spending on housing showed a marked increase, with investment in residential structures up 2.9 per cent by quarter and home ownership transfer costs up by nineper cent after two previous quarters of decline.

Exports also rose by 4.2 per cent in the second quarter the strongest performance since the third quarter of 2011 after declining by 0.2 per cent in the first three months of the year.

"The Canadian economy looks to be firing on more cylinders after a particularly tough winter," writes TD Bank senior economist Randall Bartlett in a note to investors.

He also finds positive signs for the future, writing that momentum in the second half of the year is also "strong."

"If this begins to translate into stronger employment and wage growth in the Canadian labour market, it will work to further reinforce our view that the Bank of Canada will raise interest rates in the second half of 2015," Bartlett added.

In the United States,annualized GDP grew by 4.2 per cent in the second quarter after contracting by oneper cent in the first quarter.

Despite the positive report, the S&P/TSX traded lower to start the day, down 17.8 points to 15,540 points in the earlymorning. The decline was partly due to lower-than-expectedconsumer spending in the U.S. dragging down U.S. markets.

The Canadian dollar rose slightly by0.13cents US to 92.2cents in Friday morning trading.