Canada's economy grew for a fifth- straight month in February on electricity and oil production, an expansion that backs the central bank's assessment that growth accelerated in the first quarter.

The economy grew 0.4 percent, up from a pace of 0.1 percent in January, Statistics Canada said today in Ottawa. Economists had forecast a 0.2 percent expansion, according to the median of 17 estimates in a Bloomberg News survey.

Canada's pace of economic growth quickened in the first quarter after falling to a three-year low between October and December and will improve through 2008, central bankers said April 26 when they released a forecast. Domestic demand continues to underpin economic expansion, as a rising currency hurts factory exports abroad, the central bank said as it explained a decision to leave borrowing costs unchanged.

Energy producers, which have been the country's biggest sources of new jobs in recent years, boosted output to the highest level since August. Mining and oil companies expanded production 2.9 percent in February, and utilities companies recorded a 3.2 percent increase.

Production rose for wholesalers, while falling for retailers. Wholesalers' output rose 1 percent on computers and gasoline, while retailers' production fell 0.7 percent as car sales dropped, the statistics agency said.

Canadian employers have added workers for seven consecutive months, including 158,000 new jobs in the first quarter of this year, stimulating consumer demand. After February's monthly decline, retailers' output was still 3.7 percent higher than a year earlier.

Inflation

The Bank of Canada, which says the economy was just above capacity in the first quarter, sets borrowing costs to keep inflation at 2 percent. Core inflation, the measure central bankers monitor most closely because it excludes volatile goods such as gasoline, rose 2.3 percent in March from a year ago. February's 2.4 percent pace was the fastest since March 2003.

Canada's high dollar and slowing U.S. growth continue to weigh on the economy, mainly because of the effects both have on exports. On April 27, the currency touched 89.85, the highest since Sept. 29.

Factories boosted production by 0.3 percent in February, rebounding from a 1.1 percent decline in January, led by a 4.9 percent gain in car production, the statistics agency said.

Canadian factories, on balance, expect production to increase for the first time since October 2005 between April and June, led by manufacturers of computers and appliances, according to a government survey released April 27. The percentage of factories predicting higher output was 22 percent in April, compared with 16 percent planning a decrease, the quarterly Statistics Canada poll of 3,000 managers found.

U.S. Economy

The U.S. economy grew in the first quarter at the slowest pace in four years, hobbled by a slump in home construction and a bigger trade deficit. The 1.3 percent annual growth rate was less than forecast and followed a 2.5 percent fourth-quarter pace, the Commerce Department said April 27 in Washington.

Bank of Canada Governor David Dodge said last week the U.S. economy had slowed more than the central bank had forecast. Canada sends more than 80 percent of its exports to the U.S., including lumber and other building supplies.

Construction, one of the main drivers of Canadian growth, slid for the first time in eight months, according to today's report. Builders' output declined 0.2 percent in February, as residential construction fell 1.2 percent.

A Canadian National Railway Co. strike hurt exports and led to a 5.4 percent decline in rail transportation, the statistics agency said. Trucking services benefited and boosted activity 0.6 percent.