Businesses and policymakers watch closely as Canada's economy navigates shifting trade policies
Canada’s economy expanded in January 2025, with real gross domestic product (GDP) increasing by 0.4%, according to The Daily.
Growth was recorded in both goods-producing and services-producing industries, with 13 of 20 sectors seeing gains. However, early estimates for February suggest economic activity remained flat, indicating potential challenges ahead.
The mining, quarrying, and oil and gas extraction sector contributed the most to GDP growth, rising 1.8%. Oil and gas extraction increased by 2.6%, with oil sands extraction in Alberta growing 3.6% due to higher synthetic crude production. Natural gas extraction also increased, in line with rising exports and domestic demand.
Meanwhile, the manufacturing sector rebounded from consecutive declines, growing 0.8%, primarily due to a 2.0% increase in durable goods manufacturing. Primary metal manufacturing saw a 4.8% gain, the highest since August 2020, supported by a 12.2% increase in iron and steel mill production.
According to The Daily, the utilities sector expanded for a second consecutive month, rising 2.7%, with increases in electricity generation and natural gas distribution.
Construction activity grew 0.7%, with residential building construction up 1.4%, reaching its highest level since late 2023.
Wholesale trade increased 0.7%, with motor vehicle and parts wholesaling rising 4.5% to its highest level since February 2020.
Some industries saw declines. Retail trade fell 0.9%, reversing December’s gains. Motor vehicle and parts dealers recorded a 3.2% drop, and food and beverage stores saw a 2.6% decline. Sporting goods and book retailers recorded the steepest decrease, falling 9.6%.
Economists warn that growth may slow in the coming months due to external factors. BNN Bloomberg reported that new tariffs introduced by the US in March—including a 25% tariff on steel and aluminum—could have significant economic effects, particularly on Canada’s primary metal manufacturing sector. Analysts suggest that industries tied to exports may experience additional pressure in the months ahead.
The Bank of Canada has indicated a shift in its monetary policy approach to address increasing economic uncertainty. It recently lowered its policy rate to 2.75% but may make further adjustments depending on the trade environment. BNN Bloomberg noted that financial markets are factoring in the possibility of additional rate cuts if economic data points to slowing growth.
