Canada will outpace the United States and Mexico in first-quarter automobile production growth, which will add roughly 1.5 percentage points to the country's economic growth, according to a report released by Bank of Nova Scotia.

Canadian auto production is expected to jump to an annualized 2.5 million units in the first quarter of 2011, up 32 percent from 1.9 million units in the fourth quarter of 2010, Scotiabank analyst Carlos Gomes said on Friday.

That will mark the biggest gain since mid-2009, when the global economic recovery was just taking hold.

Fourth-quarter Canadian production was down sharply, from 2.3 million units in the third quarter, due to a retooling at Chrysler's car plant in Brampton, Ontario, Gomes said in an interview.

First-quarter vehicle production in the United States is seen rising to an annualized 8.3 million units, up 9.2 percent from 7.6 million units in the fourth quarter and 8 million units in the third quarter, Gomes said.

In Mexico, first-quarter production is expected to rise 6 percent to an annualized 2.62 million units, from 2.47 million units in the fourth quarter and 2.54 million units in the third quarter, he said.

Rising vehicle output will add about 1.5 percentage points to economic growth in Canada, compared with 1 percentage point in both the United States and Mexico, the report estimates.

Canadian gains will also come from higher production at General Motor's facilities in Oshawa, Ontario, Gomes said. Late last year, GM boosted production of its popular Chevy Equinox crossover-utility vehicle, he said.

Canada produces one-third of all CUVs assembled in North America. Last year, CUVs became the largest segment in the U.S. auto market, surpassing mid-sized cars, the report said.

Production increases are being driven by a recovery in global auto sales, with January volumes up 6 percent globally from the same period last year, the report said.

During the latest financial reporting season, virtually every automaker increased their full-year 2011 global sales forecast and boosted their production schedule for the opening months of 2011, Gomes said in the report.

We estimate this will lead to a further double-digit year-over-year increase in vehicle production in most countries during the first half of the year.

China will lead the global increase in vehicle output, with full-year assemblies seen climbing 17 percent to more than 21 million units.

China will surpass European assemblies in 2011 to account for about 28 percent of global vehicle output, more than double its 13 percent share in 2008, the report said.

(Reporting by Susan Taylor; editing by Rob Wilson)

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