Canada’s economy experienced a slight uptick in January, with growth driven by gains in goods-producing sectors 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 mining, oil and gas extraction, and quarrying, which saw a significant 1.2 per cent expansion, reversing the declines from the previous month. The upsurge in oil and gas was primarily due to increased crude petroleum extraction in Newfoundland and Labrador and Saskatchewan, along with growth in natural gas extraction.
The construction industry also showed resilience, growing by 1.1 per cent in January for the third consecutive month. Both residential and non-residential building construction saw positive expansions during this period.
Douglas Porter, the chief economist at the Bank of Montreal, described the report as a “pleasant surprise,” noting that the Canadian real GDP exceeded expectations in the early months of the year despite challenging conditions. However, he cautioned that the recent conflict in Iran and subsequent rise in fuel prices could impact the economy negatively.
While manufacturing experienced a decline in January, offsetting some of the gains from December, weaknesses in durable goods were notable. Wholesale trade also saw a decrease, particularly in motor vehicles and their parts, attributed to lower exports of passenger cars and light trucks due to seasonal factors. Additionally, adverse weather conditions affected the transportation and warehousing sectors.
Meanwhile, services-producing industries like real estate, healthcare, and finance, which are significant contributors to the Canadian economy, saw minimal changes in January. Statistics Canada’s advance estimate for February suggests a 0.2 per cent increase in real GDP, subject to revision.
Despite potential challenges ahead, the data from January and the preliminary estimate for February indicate a more positive start to the first quarter than initially anticipated, as highlighted by Porter. Economists warn of possible future impacts on growth due to high crude oil prices resulting from the conflict in Iran, which could dampen consumer spending and drive inflation higher, potentially leading to interest rate hikes by the Bank of Canada amid economic vulnerabilities.