Canada's Economy Accelerates, January GDP Beats Forecasts

This positive momentum continued into February, with advance data indicating a 0.2% growth, matching December's pace. If this estimate holds, it marks the first three-month consecutive expansion since late 2024, signaling a stronger-than-anticipated first quarter before any potential fallout from the Middle East conflict and surging energy costs.

January's growth was primarily driven by goods producers, notably a rebound in mining and oil and gas extraction, which fully offset a decline from late 2025. Construction also expanded for a third straight month, fueled by residential building investment.

However, the manufacturing sector contracted 1.4%, largely due to an extended winter shutdown in Ontario's automotive plants, and wholesale trade weakened. Conversely, retail trade, finance, and insurance sectors experienced robust growth, though real estate and rental activity saw its first decline in ten months.

The Bank of Canada projects modest economic growth, acknowledging persistent challenges from U.S. protectionist policies, weak exports to the U.S., and a softened labor market. The central bank also notes that sustained high oil prices would boost energy export income but simultaneously reduce consumer discretionary spending.