Canada’s real GDP fell 0.2% in February, down from a 0.4% gain in January and coming in slightly below economists’ expectations.
Twelve of the 20 industry sectors posted declines in February, according to Statistics Canada. In a reversal from January, goods-producing industries led the contraction with a 0.6% drop, driven largely by mining, quarrying, oil and gas extraction, and construction.
Notable declines were seen in oil sands extraction (-3.8%), mining and quarrying (-2.6%), and transportation and warehousing (-1.1%). Overall, the mining, quarrying, and oil and gas extraction sector saw the steepest reversal, falling 2.8% and erasing its 2.6% gain from January.
Coal mining was the largest contributor to the sector’s decline, plunging 14.8%—its steepest monthly drop since March 2022. Statistics Canada attributed the decrease to “reduced exports to Asian markets.”
The real estate and rental leasing sector also contracted 0.4%, which was the largest decline the sector has seen since April 2022.
Service-producing industries also slipped 0.1% in February, reversing the modest gain recorded in January.
While the declines were broad-based, BMO’s Douglas Porter attributes them more to weather than to economic uncertainty. “The 0.2% drop in February GDP can be mostly attributed to weather and not uncertainty,” he wrote.
While Canada carried some economic momentum into early 2025, as we previously reported, economists now say that strength may be starting to fade.
“The economic momentum that carried into the early stages of 2025 is starting to wane,” writes TD’s Marc Ercolao. TD had previously forecast Q1 growth at around 2.0%, but has since revised that down to 1.5%—slightly below the Bank of Canada’s April MPR projection.
March GDP seen rebounding slightly, but Q2 faces growing headwinds
Statistics Canada’s flash estimate points to a 0.1% GDP gain in March, though economists caution that rising tariff pressures could weigh more heavily in the second quarter.
“The real drama now begins, with the tariffs much more of an issue in Q2, and the U.S. economy also now facing much heavier weather of its own. We would be surprised if GDP manages to grow in Q2,” writes BMO’s Porter.
Ercolao also describes the post-April outlook as “turbulent,” citing not only tariff pressures but also mounting “headwinds from plunging sentiment.”
The combination of weak sentiment and rising tariffs continues to complicate the Bank of Canada’s policy decisions, as it has in recent months.
Even so, Ercolao expects a tentative rate cut ahead, following the Bank of Canada’s recent decision to hold at 2.75%, as other parts of the economy—particularly housing—show signs of strain.
“The Bank opted to hold the policy rate steady at 2.75% last meeting, despite appearing reasonably downbeat about economic growth prospects highlighted in their scenario analysis,” he noted. “With Canada’s housing market visibly strained, and some rollover in labour markets and consumer spending, we’d expect the BoC to cut its policy rate by 25 bps at their next meeting in June.”
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Last modified: April 30, 2025