Canada’s real gross domestic product (GDP) fell 0.2% in February, pulled down by declines in mining, oil and gas, construction, and real estate. The drop partially offsets January’s 0.4% gain, according to Statistics Canada.

Goods-producing industries shrank 0.6%, with oil and gas extraction leading the downturn (-2.8%) after two months of growth. Oil sands production dropped 3.8%, the steepest since January 2024, due in part to poor weather and a tanker-terminal collision off Newfoundland.

Construction declined 0.5%, driven by a 0.9% fall in residential building activity. The real estate sector dropped 0.4% — its biggest slide since April 2022 — as home resale activity weakened for a third straight month.

Service industries also edged down 0.1%, weighed down by transportation and warehousing (-1.1%) as severe winter storms disrupted rail (-5.6%) and urban transit (-3.4%).

Despite widespread weakness, manufacturing rose 0.6%, led by machinery manufacturing (+5.9%) and motor vehicle parts (+4.2%). The finance and insurance sector grew 0.7%, driven by investment activity amid market volatility.

Preliminary estimates suggest GDP grew 0.1% in March, with Q1 2025 expected to post a 0.4% gain overall. Final figures are due May 30.

Canada’s manufacturing ties to the U.S. remain strong

The report also underscores Canada's economic reliance on U.S. demand, particularly in manufacturing. “The manufacturing sector is one of the industrial sectors with the highest exposure to the US market, relying on demand from the United States for 42% of its output and 41% of its workforce in 2023,” according to Statistics Canada.

Transportation equipment manufacturing, especially, remains heavily dependent: “52% of its output [is] attributed to direct exports to the United States and 61% of its output attributed to total demand from the United States.” In terms of jobs, 63% of employment in this sector is linked to U.S. demand.

Motor vehicle manufacturing was even more tightly tied to the U.S., with “82% of its output and 81% of the industry's jobs” dependent on American markets. The motor vehicle parts industry followed closely behind, with “77% of its output and 76% of the industry's jobs” linked to U.S. demand — including both direct exports and parts embedded in other export products.

These figures come from the Value-Added in Exports database, which measures “the direct and indirect impact of exports on gross domestic product (GDP) and jobs by industry.” It shows how deeply integrated Canadian industry is with U.S. supply chains, particularly in sectors like steel, auto manufacturing, and aerospace.