Canada’s economy experienced a slight expansion in January, with growth primarily driven by the goods-producing sectors despite a slowdown in manufacturing, revealed Statistics Canada on Tuesday. The Gross Domestic Product (GDP) increased by a modest 0.1% during the month, surpassing analysts’ predictions following a 0.2% growth in December.
The growth in January was mainly propelled by mining, oil, and gas extraction activities, which expanded by 1.2%, reversing the declines seen in the previous month. Increased crude petroleum extraction in Newfoundland and Labrador and Saskatchewan, along with the expansion of natural gas extraction, contributed to the growth in the oil and gas sector.
Furthermore, the construction industry saw a notable 1.1% growth in January, marking the third consecutive month of expansion, driven by increased activities in both residential and non-residential building construction.
Douglas Porter, the chief economist at the Bank of Montreal, described the report as a “welcome surprise,” noting that the Canadian real GDP performed better than expected in the first two months of the year. Despite challenges like severe winter conditions and weak results in manufacturing and employment at the beginning of 2026, the economy seemed to be in better shape than anticipated before the turmoil caused by the conflict in Iran.
However, manufacturing experienced a decline in January, offsetting some of the growth observed in December, primarily due to weaknesses in the durable goods subsector. Wholesale trade also decreased, especially in motor vehicles and parts, as exports of passenger cars and light trucks declined due to a seasonal reduction in auto production. Adverse weather conditions negatively impacted the transportation and warehousing sectors.
Services-producing industries such as real estate, healthcare, and finance, which are significant contributors to the Canadian economy, showed minimal change during the month. Statistics Canada’s preliminary estimate for February suggests a 0.2% increase in real GDP, with the actual figure subject to adjustments.
The performance in January and the estimated growth for February have set a more positive tone for the first quarter than initially projected, according to Porter. Economists, however, warn that future growth may be hindered by the impact of elevated crude oil prices resulting from the conflict in Iran, leading to reduced consumer spending and heightened inflation. This situation might prompt the Bank of Canada to consider raising interest rates despite the prevailing economic challenges.