Editor’s Note: Please see our analysis of the latest news from our Dividend Champions in the Portfolio Update section following the article below.

Looks like things might not be so bad after all. Despite the oil shock, Canada’s economy likely expanded at a much faster pace than the U.S. during the first quarter.

The initial reading for U.S. first-quarter gross domestic product (GDP) growth was already expected to show a sharp deceleration from last year’s already-anemic numbers.

But the U.S. economy actually performed even worse than expected, growing by just 0.5% quarter over quarter annualized, about two-tenths of a percentage point below the consensus forecast.

Meanwhile, the Canadian economy is projected to have expanded by 2.9% during the first quarter. We’re still waiting on the numbers—Statistics Canada isn’t scheduled to release first-quarter GDP until the end of May.

Of course, U.S. first-quarter growth could get revised higher. The U.S. Bureau of Economic Analysis typically publishes three GDP estimates for each calendar quarter, and the number released this week was just the initial estimate.

For example, fourth-quarter GDP originally came in at 0.7%, but was revised higher in each follow-up estimate, for a final reading of 1.4%.

Assuming the Canadian economy performs in line with estimates, it’s unlikely that the U.S. economy will match its neighbor to the north, at least for the first quarter.

But we’re not just celebrating a rare victory here. The commodities crash has been so brutal that it’s easy to forget the fact that Canada’s economy actually outpaced the U.S. in four of the past six calendar years.

Even so, last year, the energy bust was brutal: The Canadian economy grew by just 1.2%, or roughly half the rate of the U.S.

This year, Canadian GDP growth is forecast to accelerate modestly, to 1.6%, while the U.S. is expected to slow to 2.0%.

So in all likelihood, Canada’s first-quarter win will be subsequently eclipsed, as growth picks up in the U.S. over the next three quarters.

Beyond that, we probably shouldn’t gloat when Canada bests its neighbor. With three-quarters of exports bound for the U.S., the Canadian export economy is heavily dependent on American demand.

And while a lower exchange rate can help boost demand, a strong U.S. economy is equally important, especially given the recent rebound in the Canadian dollar coupled with the sudden weakness of the greenback.

The loonie currently trades just below US$0.80, up nearly 17% from its low of US$0.686 back in January. Meanwhile, the U.S. dollar index has fallen by about 7% over that same period.

A big part of this divergence is the sudden dovishness of the U.S. Federal Reserve. In December, the central bank hiked its benchmark federal funds rate for the first time in a decade, to a range of 0.25% to 0.5%. At the time, the Fed forecast another four rate hikes in 2016.

Since then, however, the global economic backdrop has gotten more uncertain, while there has been significant volatility in the financial markets. Consequently, the Fed now projects just two rate hikes this year, while it lowered its long-term forecast for short-term rates to just 3.3% from 3.5%.

At the Fed’s latest meeting this week, policymakers acknowledged recent economic weakness, but focused more on the positives, while omitting previous language regarding the risks posed by the global economy and financial markets.

If the central bank raises rates two more times this year, then that will likely weigh on the Canadian dollar, since the Bank of Canada is essentially stuck in a holding position, with its overnight rate expected to remain at 0.5% at least through year-end.

However, bond markets have rallied in the wake of the Fed’s latest meeting, since it didn’t overtly hint at a June rate hike. And based on futures data aggregated by Bloomberg, a majority of traders are betting on just one more rate hike this year, to a range of 0.5% to 0.75%.

That means the tailwind from a rising loonie could last a bit longer, even if it ultimately pinches Canada’s export activity.

The Dividend Champions: Portfolio Update

By Deon Vernooy

Canadian National Railway Co. (TSX: CNR, NYSE: CNI) reported decent first-quarter results, but management lowered its outlook for the current year. Investors did not like the guidance, and the share price came under substantial pressure.

Revenue declined by 4%, as carload volumes dropped by 7%. Price increases of around 2.5% were not enough to offset freight-volume weakness. All commodity-related cargo (crude, coal, metals and grain) declined, while intermodal, automobiles and forest products fared better.

Operating expenses, down by 14%, were extremely well contained given the weak operating environment. All the main expense categories, including labor and fuel, declined by substantial margins as the company tightened cost controls. The key operating ratio (operating expenses as a portion of revenue) declined to 58.9%, a first-quarter record low.

Management guided to flat earnings per share for the full year as a result of lower-than-expected volumes and the stronger Canadian dollar. The balance sheet remains solid and cash flows are excellent.

The valuation for the stock remains full, with a premium valuation compared to its North American peers. The stock has a forward yield of 1.8%, and we estimate its fair value at C$82.

Thomson Reuters Corp. (TSX: TRI, NYSE: TRI) delivered a reasonable first-quarter result, despite several items that complicated comparisons.

On a consolidated basis, revenue declined by 1%, while EBITDA (earnings before interest, taxation, depreciation and amortization) increased by 2%. The largest division, Financial and Risk, continued to grind out gains, with a 9% increase in EBITDA, as net sales of financial-services products increased for the 8^th quarter in a row. The legal division also performed well, with a 2% increase in revenue and a 4% increase in EBITDA.

Thomson is in the process of divesting its Intellectual Property and Science division and, therefore, decided to classify the business as a “discontinued” operation. The closing is expected in the second half of 2016, but no indication has been given of expected contract terms.

The company expects to deliver low-single-digit revenue growth for the full year and slightly higher profit margins. This is unchanged from previous guidance.

Thomson continued its share-repurchase program, with 11.7 million shares (1.5% of outstanding shares) bought during the first quarter. The balance sheet is somewhat stretched, with a net debt to capital ratio of 65%, but the cash flows remain sound. Hopefully, the proceeds of the division sale will at least partly be used to reduce the debt load.

The valuation on the business is somewhat complicated by the pending sale of the Intellectual Property business, as the proceeds and their subsequent reallocation are currently unknown. On the restated profit estimates, the business now seems fully valued. The stock currently yields 3.3%, and we estimate its fair value at C$53, or US$42.

Choice Properties REIT (TSX: CHP-U, OTC: PPRQF), whose biggest tenant is Loblaw, a top Canadian food retailer, delivered another round of steady progress.

Funds from operations per unit increased by 6%, while the distribution per unit was lifted by 3% compared to a year ago.

Rental revenue was up by 6%, as occupancy increased marginally to 98.7%. Expenses increased by 7%, with the result that net operating income increased by 5%.

The valuation remains reasonably attractive, with a distribution yield of 4.8% and a payout ratio of 82%.