Soaring energy prices fuelled a 10.6% surge in corporate profits in the first quarter Statistics Canada reported Wednesday.

Operating profits of $42.9 billion were the highest since the fourth quarter of 2000. Profits have now risen for five consecutive quarters after slumping throughout 2001.

Operating profits were 26.6% higher year over year. RBC Financial says 15 of 24 broad industry groups reported gains, with gains concentrated in the energy sector and among the chartered banks.

“However, excluding oil and gas extraction and refining industries and the chartered banks, corporate profits recorded a more modest 1.2% quarterly improvement,” RBC says. “The large profit gains over the first quarter in tandem with Canada’s relatively high level of capacity utilization noted in a release yesterday suggests that business capital investment should post a reasonably healthy level of growth in up-coming quarters and should make a firm contribution to overall demand.”

Looking ahead, RBC says that the market’s attention is focused on tomorrow’s speech and subsequent press conference by Bank of Canada governor David Dodge.

The speech will focus on ‘recent economic developments and the conduct of monetary policy.’ “Dodge is also expected to lay out the case for being cautious on the interest rate front given some of the headwinds that are currently blowing on the Canadian economy, namely the temporary effects of SARS, mad cow disease and the lingering weakness of the U.S. economy,” it says. “But we expect the Bank to remain vigilant regarding the need to resume hiking interest rates later in the year as domestic and external conditions improve.”