Canada’s economy experienced a slight uptick in January, with growth driven by gains in goods-producing industries despite a slowdown in manufacturing, according to Statistics Canada. The Gross Domestic Product (GDP) expanded by 0.1 per cent during the month, surpassing analysts’ predictions following a 0.2 per cent growth in December.
Key contributors to the growth were the mining, oil, and gas sectors, which surged by 1.2 per cent, reversing the declines seen in December. The increase in oil and gas extraction was primarily driven by heightened crude petroleum extraction in Newfoundland and Labrador and Saskatchewan, along with an expansion in natural gas extraction.
Additionally, the construction industry saw a 1.1 per cent growth in January, marking the third consecutive month of expansion, fueled by both residential and non-residential building construction activities.
Chief economist Douglas Porter from the Bank of Montreal described the report as a positive surprise, noting that the Canadian economy showed resilience in the first two months of the year despite challenging conditions. However, he cautioned that the conflict in Iran and the subsequent rise in fuel prices could impact future economic performance.
On the downside, manufacturing experienced a decline in January, offsetting some of the gains from December, primarily due to weaknesses in the durable goods segment. Wholesale trade also contracted, particularly in motor vehicles and their parts, driven by reduced exports of passenger cars and light trucks amid a seasonal decline in auto production. Adverse weather conditions weighed on the transportation and warehousing sectors.
Meanwhile, services-producing industries such as real estate, healthcare, and finance, which are significant contributors to the Canadian economy, remained relatively stable during the month.
Looking ahead, the advance estimate for February suggests a 0.2 per cent increase in real GDP, although this figure is subject to change. Economists anticipate potential challenges to growth in the upcoming months, including the impact of elevated crude oil prices stemming from the conflict in Iran, which may dampen consumer spending and fuel inflation. This situation could potentially prompt the Bank of Canada to raise interest rates during a period of economic fragility.
