Canada GDP Rises 0.2% in February -- Update

By Robb M. Stewart

OTTAWA--Canada's economy looks to have grown strongly in the first quarter of the year, though fading momentum and flat output by industry last month is likely to keep alive expectations the central bank can shift to cutting interest rates by the summer.

Preliminary data suggest gross domestic product, a broad measure of goods and services produced across the economy, was essentially unchanged in March, Statistics Canada said Tuesday.

That follows a 0.2% rise in February GDP from the month before to 2.218 trillion Canadian dollars, the equivalent of $1.624 trillion, which was softer than the data agency's advance estimate of 0.4% growth and follows 0.5% expansion in January. Compared with a year earlier, GDP in February increased 0.8%.

If March's estimate stands when official numbers are released late next month, Canada managed industry-level growth of 2.5% annualized in the first quarter following a rise of 0.6% in the final three months of 2023.

After effectively stalling in the second half of last year, growth has picked up in part thanks to a booming population and recovery in household spending even as unemployment has been creeping higher and inflation has cooled. The Bank of Canada anticipates the economy will continue to strengthen this year, and has projected gross domestic product including consumption data will rise about 2.8% in the first quarter following annualized growth of just 1% the quarter before and a slight contraction in the third quarter of last year.

Still, economists said a cooling pace of growth through the latest quarter should offer the central bank confidence the strong start to the year won't be sustained, opening the door to rate cuts. The Bank of Canada, which holds its next policy meeting in early June, has held its benchmark interest rate steady at each of its last six meetings since last raising it last July to a more than two-decade high of 5%.

Statistics Canada said advance information for March indicates increases in utilities and real estate, rental and leasing were offset by declines in manufacturing and retail trade.

The month before, growth was driven by services-producing industries. Goods-producing industries were broadly flat for the month, except for natural resources extraction, which rebounded from weakness in January to expand for a fourth time in five months.

The agency said transportation and warehousing showed its largest monthly growth since January 2023, buoyed by a recovery in rail transportation as activity returned to normal following January's cold snap in Western Canada. Air transportation was also up strongly, with the strongest growth rate since May 2022.

Canada's public sector grew modestly following a sharp increase to start the year with a recovery in educational services following the end of a public-sector workers strike in Quebec. Finance and insurance activity was up for a third consecutive month, driven by financial investment services, funds and other financial vehicles, Statistics Canada said.

Mining, quarrying and oil and gas extraction grew 2.5% in February, following a 2.3% decline the month before. Oil and gas output expanded to partially offset a contraction in January when extreme cold across Canada's Prairies affected production, while mining more than recovered from January's decline.

Manufacturing in Canada declined for the month, thanks in part to a fall in motor vehicle and parts as shutdowns for retooling at some plants continued to dent production.

Write to Robb M. Stewart at [e-mail]

(END) Dow Jones Newswires

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