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GDP Edges Up in February as Manufacturing Rebounds

Canadian Economics

By: Walter Bolduc

    

Real gross domestic product (GDP) rose 0.2 per cent month-over-month in February, building on January’s 0.1 per cent gain.

  • Goods-producing industries grew 0.4 per cent and services-producing industries edged up 0.1 per cent, with goods leading the gains for a second straight month.
  • Manufacturing rose 1.8 per cent, its largest gain since January 2023, with durable goods up 3.6 per cent. Machinery manufacturing jumped 8.7 per cent on stronger industrial and metalworking output.
  • Transportation equipment manufacturing rose 5.5 per cent as motor vehicles and parts surged 9.8 per cent, partly reversing January’s 7.0 per cent drop. Ontario auto plants restarted after January closures for model changeovers, and stronger exports of vehicles, engines, and parts tracked higher U.S. production.
  • Public administration fell by 0.5 per cent, its second consecutive monthly decline. per cent for a second straight month, with declines at federal, provincial, and local levels. Educational services also fell by 0.5 per cent, pulling the public sector down by 0.3 per cent after three months of growth.
  • Wholesale trade rose by 0.9 per cent, while transportation and warehousing expanded by 1.2 per cent behind the manufacturing pickup. Motor vehicle and motor vehicle parts and accessories merchant wholesalers rose 6.1 per cent. Meanwhile, truck transportation rose 2.3 per cent, its largest gain since March 2021, on stronger freight demand.
  • Mining, quarrying, and oil and gas extraction grew by 0.4 per cent. Oil and gas extraction recorded its second consecutive monthly increase (0.4 per cent), while mining and quarrying (except oil and gas) expanded by 1.2 per cent.
  • Arts, entertainment and recreation contracted 2.5 per cent, its largest drop since January 2022. Performing arts, spectator sports and related industries, and heritage institutions fell 5.8 per cent, on weaker spectator sports during the NHL’s two-week break for the Milano–Cortina Olympics.
  • Statistics Canada’s advance estimate shows flat growth in March, as gains in wholesale trade and transportation and warehousing were offset by decreases in mining, quarrying, and oil and gas extraction.
  • Including March, the Canadian economy is on track to expand by 0.4 per cent in the first quarter.

Key insights

Trade-exposed manufacturing is carrying the headline again. Motor vehicles and parts manufacturing jumped 9.8 per cent after three straight monthly declines, largely because Ontario assembly plants restarted following January closures for model changeovers and assembly-line maintenance. The rebound tracks with higher U.S. auto production and stronger Canadian exports. Even so, transportation equipment manufacturing sits below its year-end 2025 level. Today’s release continues the trend of manufacturing leading the headlines, with February showing a strong positive gain for the sector which has been on a roller coaster over the past year.  

Public sector cuts are evident. The public administration sector contracted for the second month in a row in February. Year-over-year, the industry has expanded by 0.3 per cent, but the headline figure masks significant variation across levels of government. Provincial and municipal public administration have seen significant growth over the past year, while federal public administration (except defense) has contracted sharply, by 5.5 per cent. The pullback likely reflects federal public service cuts, which ramped up last year following the government’s plans to reduce administration spending. Looking ahead, we expect continued weakness in federal public administration, weighing on growth across the broader public sector.

Confidence remains fragile. Real GDP is on track to grow 0.4 per cent in the first quarter, and while we remain optimistic about a pickup in activity over the course of the year, uncertainty continues to loom large. U.S. trade actions are already squeezing Canadian exporters with broader impacts on the economy still unfolding, and the upcoming CUSMA review in July could present a wide range of outcomes. Meanwhile, the war in the Middle East is keeping oil prices elevated and volatile. These risks are evident in our sentiment measures. Our Index of Consumer Confidence has shown modest improvement recently but remains subdued, a pattern shared with our Index of Business Confidence—suggesting that caution will continue to shape the Canadian economy in the months ahead.

To learn more about Canada’s economic outlook for the long term or the next five years, please consult our Canadian Five-Year Outlook.

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