The Canadian economy grew 0.2 percent in February, matching analysts’ forecasts and marking the fourth consecutive month of GDP growth. The recovery was driven primarily by the manufacturing sector, which posted its best performance since early 2023, as well as strengthening in the oil, gas, and transportation industries.
Despite successfully avoiding recession amid US tariff pressure, the Canadian economy remains in a challenging position. The steel and automotive sectors continue to be hit, but the extension of the North American Free Trade Agreement is seen as a critical shield that protects more than 85 percent of the country’s economy from the more adverse impact of tariffs.
Geopolitical tensions in the Middle East had a mixed effect; Canada as an energy exporter benefited from Brent oil prices that surged to $114 per barrel. However, the Bank of Canada warned that uncertainty from the Iran war continues to put cost pressures on consumers and domestic business operations.
StatsCan data showed contractions in agriculture, construction and public administration partially offset large gains in manufacturing. The federal public sector in particular shrank by 0.4 per cent, reflecting a slowdown in government spending in the month.
The preliminary forecast for the first quarter of 2026 puts annual growth at 1.7 per cent. In financial markets, the Canadian dollar strengthened slightly to C$1.3669 against the US dollar, while the two-year government bond yield fell by 6 basis points.
