The Canadian economy contracted 0.2% in February according to Statistics Canada, a decline from 0.4% growth in January.
The decline was led by the mining, quarrying, and oil and gas sector, which fell 2.5%. The services-producing sector dropped 0.1%. Construction fell 0.5%, largely due to a 0.9% drop in residential building construction, partially offset by a 0.6% rise in non-residential construction. Manufacturing was a bright spot, with the sector up 0.6% on strong machinery manufacturing growth of 5.9% and 4.2% growth in motor vehicle parts manufacturing. Primary metal manufacturing fell 2.3%. Overall, 12 of 20 industrial sectors declined.
It would be wise to avoid reading too much into this decline. While the U.S. Q1 GDP drop of 0.3% was clearly due to companies ramping up imports to front-run tariffs, here in Canada, storms negatively impacted economic activity in Central and Eastern Canada, along with BC. There is evidence of a potential rebound, with Statistics Canada’s advance information indicating a 0.1% GDP increase in March. The agency estimates GDP growth of 0.4% in Q1. That would give Canada a rate of growth 0.7 points above that in the U.S., indicating the extent to which tariffs are negatively impacting the U.S. economy.
Spencer Fernando
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