Canadian economy loses steam after strong start to year, grows 0.2% in February

By Nojoud Al Mallees, The Canadian Press

The Canadian economy lost momentum after a roaring start to the year, reinforcing economists’ expectations that the Bank of Canada is on track to cut interest rates in the coming months.

Statistics Canada reported Tuesday that real gross domestic product rose 0.2 per cent in February. That followed a 0.5 per cent gain in January.

“Today’s GDP report confirmed our expectations that the January surge in output was temporary, and in no way marked an inflection point for the growth backdrop in Canada that remains very weak,” said RBC economist Claire Fan in a client note.

Looking ahead, the federal agency says its advance estimate for March indicated that real GDP was essentially unchanged for the month.

Based on the preliminary figure, the Canadian economy grew at an annualized rate of 2.5 per cent in the first quarter of 2024.

Economists say the latest data suggests the big boost to the economy at the start of the year in January was driven by temporary factors, including a rebound from Quebec’s public sector strike. 

That will likely land as good news for the Bank of Canada, which is looking for sustained evidence that the economy and inflation are responding to higher interest rates.

Overall, Statistics Canada said 12 of 20 sectors showed growth in February. 

The economic expansion in the month came as services-producing industries increased 0.2 per cent. It was helped by the transportation and warehousing sector which increased 1.4 per cent, as rail transportation grew 5.5 per cent with activity returning to normal after freezing temperatures in January in Western Canada.

Air transportation also increased 4.8 per cent in February, driven by growth in international travel as some airlines increased capacity to Asia. 

Statistics Canada said goods-producing industries were essentially unchanged.

The mining, quarrying, and oil and gas extraction sector grew 2.5 per cent in February as oil and gas extraction increased 3.3 per cent, partially offsetting a contraction in January. Mining and quarrying (except oil and gas) rose 1.9 per cent.

The utilities sector contracted 2.6 per cent, while the manufacturing sector fell 0.4 per cent.

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