Transport and Services Propel Growth, While Manufacturing Faces Challenges
In February 2024, Canada’s real gross domestic product (GDP) experienced a modest 0.2% increase, following a 0.5% gain in January. This article provides an in-depth analysis of the key sectors contributing to this growth, shedding light on both the successes and challenges within the Canadian economy.
The services-producing industries emerged as the primary drivers of growth for the second consecutive month, with a notable 0.2% increase. Within this sector, transportation and warehousing saw a remarkable 1.4% growth, the highest since January 2023. Contributing to this surge was a rebound in rail transportation, which rose by 5.5% as activity returned to normalcy after January’s cold snap in Western Canada. Air transportation also experienced a substantial 4.8% increase, driven by international travel demand leading up to the Lunar New Year.
While the public sector continued its expansion, albeit at a slower pace, growing by 0.2% in February following a robust 1.9% increase in January, the educational services sector witnessed a slight uptick of 0.1%. However, this growth was tempered by challenges such as rotating strikes by the Saskatchewan Teachers’ Federation, which dampened some of the sector’s momentum.
After a decline in January, the mining, quarrying, and oil and gas extraction sector rebounded with a notable 2.5% increase in February, marking its fourth expansion in five months. Oil and gas extraction, in particular, expanded by 3.3%, partially offsetting January’s contraction caused by extreme weather conditions. The sector’s resilience was further underscored by increases in metal ore mining, notably gold and silver ore mining, which rose for the third consecutive month.
In contrast to the overall positive trend, the utilities sector contracted by 2.6% in February, following a 3.2% increase in January. This decline was driven by decreased demand for heating-related purposes and lower reservoir levels impacting hydroelectric power generation.
Similarly, the manufacturing sector experienced a downturn, contracting by 0.4% in February. This decline was largely attributed to decreases in transportation equipment manufacturing and chemical products manufacturing. Motor vehicle and parts manufacturing, in particular, saw a significant contraction of 2.9%, primarily due to retooling activities impacting production.
Despite challenges faced by other sectors, finance and insurance continued its upward trajectory, increasing by 0.3% for the third consecutive month. Financial investment services, funds, and other financial vehicles were the primary drivers of this growth, fueled by increases in mutual fund and equity activity.
Advance estimates for March 2024 indicate that real GDP was essentially unchanged, with increases in utilities and real estate and rental and leasing offset by decreases in manufacturing and retail trade. While these estimates provide a preliminary overview, the official data for March, scheduled for release on May 31, 2024, will offer a more comprehensive understanding of the economy’s performance.