Canada’s actual GDP fell 0.2% in February, down from a 0.4% acquire in January and coming in barely beneath economists’ expectations.
Twelve of the 20 trade sectors posted declines in February, in line with Statistics Canada. In a reversal from January, goods-producing industries led the contraction with a 0.6% drop, pushed largely by mining, quarrying, oil and gasoline extraction, and development.
Notable declines had been seen in oil sands extraction (-3.8%), mining and quarrying (-2.6%), and transportation and warehousing (-1.1%). General, the mining, quarrying, and oil and gasoline extraction sector noticed the steepest reversal, falling 2.8% and erasing its 2.6% acquire from January.
Coal mining was the biggest contributor to the sector’s decline, plunging 14.8%—its steepest month-to-month drop since March 2022. Statistics Canada attributed the lower to “diminished exports to Asian markets.”
The actual property and rental leasing sector additionally contracted 0.4%, which was the biggest decline the sector has seen since April 2022.
Service-producing industries additionally slipped 0.1% in February, reversing the modest acquire recorded in January.
Whereas the declines had been broad-based, BMO’s Douglas Porter attributes them extra to climate than to financial uncertainty. “The 0.2% drop in February GDP could be largely attributed to climate and never uncertainty,” he wrote.
Whereas Canada carried some financial momentum into early 2025, as we beforehand reported, economists now say that power could also be beginning to fade.
“The financial momentum that carried into the early phases of 2025 is beginning to wane,” writes TD’s Marc Ercolao. TD had beforehand forecast Q1 progress at round 2.0%, however has since revised that right down to 1.5%—barely beneath the Financial institution of Canada’s April MPR projection.
March GDP seen rebounding barely, however Q2 faces rising headwinds
Statistics Canada’s flash estimate factors to a 0.1% GDP acquire in March, although economists warning that rising tariff pressures may weigh extra closely within the second quarter.
“The actual drama now begins, with the tariffs way more of a difficulty in Q2, and the U.S. economic system additionally now dealing with a lot heavier climate of its personal. We’d be shocked if GDP manages to develop in Q2,” writes BMO’s Porter.
Ercolao additionally describes the post-April outlook as “turbulent,” citing not solely tariff pressures but in addition mounting “headwinds from plunging sentiment.”
The mix of weak sentiment and rising tariffs continues to complicate the Financial institution of Canada’s coverage choices, because it has in latest months.
Even so, Ercolao expects a tentative fee lower forward, following the Financial institution of Canada’s latest choice to carry at 2.75%, as different elements of the economic system—significantly housing—present indicators of pressure.
“The Financial institution opted to carry the coverage fee regular at 2.75% final assembly, regardless of showing moderately downbeat about financial progress prospects highlighted of their state of affairs evaluation,” he famous. “With Canada’s housing market visibly strained, and a few rollover in labour markets and client spending, we’d anticipate the BoC to chop its coverage fee by 25 bps at their subsequent assembly in June.”
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Final modified: April 30, 2025