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(Bloomberg) — The Canadian economy bounced back in the first quarter after a softer end to 2025, with growth driven by an expansion in goods-producing industries.
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Real gross domestic product in the first quarter is on track for a 1.7% annualized increase, with the economy expanding by 0.2% in February and a preliminary estimate suggesting it was flat in March, according to industry-based data released by Statistics Canada on Thursday.
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February marked the fourth consecutive monthly increase, with goods-producing industries driving growth for a second month in a row.
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Economists surveyed by Bloomberg were expecting 0.2% growth in February and predict a 1.5% expansion for the quarter when final expenditure-based figures are released next month.
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The expansion in the first quarter follows a 0.6% annualized contraction in the final three months of 2025, according to the expenditure-based data.
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Growth in February was led by manufacturing, which expanded by 1.8%, marking the largest monthly expansion for the sector since January 2023. Durable goods manufacturing, which increased by 3.6%, led the expansion.
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Wholesale trade increased by 0.9% in February, nearly offsetting a decline in the previous month. Growth in that sector last was driven by auto wholesalers, which saw a 6.1% increase. StatCan said the boost was driven by higher production of motor vehicles as well as higher auto imports. The rebound followed vehicle plant retooling in January.
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Mining, quarrying and oil and gas extraction grew by 0.4%. The federal statistics agency said the increase reflected increased crude petroleum production in Saskatchewan and Newfoundland and Labrador, as well as increased natural gas extraction. Oil sands extraction decreased by 1.7% as maintenance at several facilities lowered synthetic crude production and tempered growth in the sector.
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Meanwhile, the public sector — which includes educational services, health care and social assistance as well as public administration — contracted by 0.3% in February, seeing broad-based declines. This follows three consecutive monthly increases in the public sector.
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The Bank of Canada expects US tariffs to continue weighing on the economy, with the upcoming review of the United-States-Mexico-Canada Agreement serving as a risk to the economic outlook.
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Despite the Iran war driving up oil prices and causing a spike in headline inflation, the central bank maintained its policy rate at 2.25% on Wednesday and said heightened uncertainty means interest rates may need to be adjusted in either direction.
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However, financial markets are betting on policy tightening later this year. Traders in overnight swaps increased bets for rate hikes after the announcement, pricing in about 50 basis points of tightening by the bank’s October meeting.
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—With assistance from Mario Baker Ramirez.
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English (US)