Canada’s economy contracted by 0.2% in February 2025, as a broad decline in goods-producing industries offset recent gains. The monthly drop in real gross domestic product (GDP) follows a 0.4% increase in January.
Oil and gas extraction fell 2.8% in February, erasing January’s 2.6% growth. The biggest pullback came from oil sands operations, which dropped 3.8%. Production in Alberta and Newfoundland and Labrador declined due to harsh North Atlantic weather and a collision between an oil tanker and a transshipment terminal, which disrupted offshore output. Crude petroleum and natural gas extraction also fell, while coal mining plunged 14.8% — the sharpest monthly drop since March 2022 — driven by a decrease in exports to Asia. Metal ore mining continued to weaken, with copper, nickel, zinc, and iron ore production all down. However, a 3.5% increase in potash mining helped limit the sector’s overall decline.
Construction activity declined by 0.5%, ending a four-month streak of growth. The largest drop was in residential construction, which fell 0.9% as home renovation work and new builds slowed. Engineering projects and repair construction also declined, while non-residential building construction continued to rise for a seventh straight month, helped by industrial and public sector investments.
The real estate and rental and leasing sector dropped 0.4% — its largest decline since April 2022. Activity at real estate agencies and related services was down 10.4% for the third month in a row, falling to levels last seen in late 2023. Legal services, which are closely tied to real estate transactions, declined by 1.4%.
Severe winter weather across Central and Eastern Canada, along with storms in British Columbia, disrupted transportation and warehousing. The sector dropped 1.1% in February. Urban transit use declined as poor road conditions limited travel in major cities. Rail transportation fell 5.6% — the sharpest decline since August 2024 — due to train cancellations and slowdowns caused by ice and snow.
Despite the overall economic decline, manufacturing rose 0.6% in February, helped by growth in durable goods. Machinery manufacturing posted a 5.9% increase — its strongest monthly gain in a year. Motor vehicle parts also performed well, with exports driving a 4.2% rise. However, primary metal manufacturing and wood products pulled the sector down slightly. Weakness in sawmills and lumber exports contributed to a 1.3% drop in wood products manufacturing.
The finance and insurance sector grew by 0.7%, rising for a third straight month. The increase was led by a 2.7% gain in investment services, supported by a rise in trading activity and a notable divestment of Canadian stocks by foreign investors. Banking activity showed a small increase. Demand deposits were up, while fixed-term deposits continued to fall. These shifts reflect ongoing adjustments to interest rate cuts by the Bank of Canada that began in mid-2024.
Early estimates suggest GDP grew by 0.1% in March, thanks to gains in mining, retail, and transportation. If confirmed, this would bring first-quarter GDP growth to 0.4%. Official data for March and Q1 will be released on May 30.