By Julie Gordon

OTTAWA, (Reuters) – Canada’s economy grew at 3.1% annually in the first quarter. This was below expectations, but still in line with central banks projections. Real GDP grew 0.7% in March, and probably rose 0.2% by April, Statistics Canada data revealed on Tuesday.

Reuters analysts polled had predicted a 5.4% annualized increase in first-quarter growth and a gain 0.5% for March. Bank of Canada, April projections for first quarter growth of 3.0% and 6.0% respectively in the second quarter.

Statscan stated that quarterly growth was lower than the two previous quarters because of a 2.4% drop in international trade volumes. The quarter saw lower oil and gas production, since GDP is based on volume, not prices. This was due to Russia’s incursion in Ukraine.

Domestic demand increased by 1.2%, compared to 0.9% during the fourth quarter 2022. The increase in household spending was accompanied by an increase in goods outlays, which were at their highest levels since 2005, except for a possible third-quarter 2020 pandemic.

The housing sector continued to drive economic activity. Renovations, resale prices and new construction are all on the rise. However, Canadians added less mortgage debt than the fourth quarter 2021 because interest rates started to rise.

The increase in compensation for employees was 3.8%. This is the biggest quarterly gain since 1981. It excludes the pandemic swing and it’s up from 2.0% in the fourth quarter 2021.

Statscan stated that “average wages increased along with economic activity and employer efforts to attract skilled workers through offering higher salaries.”

Canadian Dollar traded at 0.2% below the greenback (1.2682, or 78.85 U.S.cents)