Key Takeaways

• Steady momentum: Canada’s GDP rose 0.2% month-on-month in February, matching expectations and marking the fourth consecutive month of positive growth.
• Manufacturing the standout: The sector surged 1.8% — its strongest monthly performance since January 2023 — with broad-based gains across transportation equipment and automotive.
• Tariff resilience: Canada has avoided recession despite U.S. tariffs, though steel, automotive, and lumber sectors continue to feel the squeeze.
• Trade pact crucial: The North American free trade deal shields more than 85% of Canada’s economy from U.S. tariffs, making its renewal a top priority.
• Iran war wildcard: The Bank of Canada flagged the conflict as a major source of uncertainty — higher oil prices benefit Canada but strain consumers and businesses.
• Q1 growth tracking higher: StatsCan’s advance estimate puts Q1 annualized growth at 1.7%, beating the BoC’s revised 1.5% forecast.
• March may stall: Monthly GDP is projected to remain flat in March based on initial estimates.
• Pockets of weakness: Agriculture contracted 1.3%, construction slowed 0.5%, and the public sector aggregate declined 0.3%.

Canada’s economy expanded by 0.2% in February compared with January, matching analyst expectations, as goods-producing industries powered gains for the second consecutive month, according to data released on Thursday.

The reading marked the fourth straight month of positive GDP growth and followed a modest 0.1% increase in January.

The February acceleration was driven by a sharp rise in manufacturing activity, a rebound in wholesale trade, growth in transportation and warehousing, and expansion in mining and oil and gas extraction, among other sectors, Statistics Canada said.

Defying U.S. Tariff Headwinds

Canada’s economy has managed to sidestep a recession in the face of U.S. tariffs, although several pivotal sectors — including steel, automotive, and lumber — have come under significant pressure.

Economists and policymakers view a successful review and continuation of the North American free trade agreement as critical for Canada, given that the deal shields more than 85% of the economy from U.S. tariffs.

The Bank of Canada said on Wednesday that the Iran war also remained a major source of uncertainty. While Canada benefits from elevated oil prices, both consumers and businesses continue to feel the strain from rising costs.

According to an advance estimate from StatsCan, monthly GDP is likely to remain unchanged in March, with annualized first-quarter GDP growth — based on industrial output — projected at 1.7%, the statistics agency reported.

That figure runs slightly ahead of the Bank of Canada’s revised estimate, which had pegged first-quarter annualized growth at 1.5%.

Monthly GDP figures are calculated using industry-level output, while quarterly GDP is measured through expenditure-based data — a methodological gap that can produce differences in reported growth rates.

Manufacturing Roars Back

February’s expansion was led by a 1.8% jump in the manufacturing sector, which posted its largest monthly gain since January 2023.

Manufacturing — one of the sectors most exposed to U.S. tariffs and largely mired in a downturn since last year — saw robust growth across all major subsectors, including transportation equipment and automotive.

Drag from Agriculture, Construction, and the Public Sector

Agriculture, construction, and public sector operations partially offset the solid gains posted elsewhere in the economy.

Agriculture, forestry, fishing, and hunting saw activity contract by 1.3%, while construction posted a deceleration of 0.5%.

The public sector aggregate — covering educational services, health care and social assistance, and public administration — was down 0.3% in February, with federal government public administration alone contracting 0.4%, StatsCan said.