MNI: Canada Feb GDP Stalls After Biggest Gain Since April

Canada's flash GDP was little changed in February following the biggest gain since April, with signs companies stockpiled products before U.S. tariffs took effect while domestic consumers pared back spending. 

Statistics Canada said Friday the flat February reading was a mix of gains in manufacturing and declines in real estate and retailing, after January saw the biggest gain among industrials in more than three years led by oil and gas. The improvement also came from a 12% jump in the category including steel and aluminum that President Donald Trump targeted for tariffs, leading a 4.8% rise in the broader primary metals category that was the biggest since August 2020. Wholesaling also climbed in January on exports of autos, another area targeted for tariffs. 

February's decline in real estate was a give-back from January when homebuilding rose for the fifth time in six months, responding to central bank rate cuts at every meeting since June. Many economists see more relief coming with the U.S. threatening a broad 25% tariff early next month. Retail sales declines in January and February add to evidence consumer confidence was shaken as Trump escalated trade threats. 

Bank of Canada Governor Tiff Macklem has said while the economy grew at a solid 2% annualized first-quarter pace, an intense trade war could push Canada into recession and create risks that one-time tariff price hikes will lead to broader inflation. In recent weeks economists at TD, National Bank, Desjardins and Oxford Economics have penciled in back-to-back quarters of negative GDP growth coming later this year. (See: MNI INTERVIEW: BOC To Cut More, Wary Of Inflation- Ex Staffer)

Besides the drag from trade the government is curbing record immigration and economists say that will lead to reduced potential GDP expansion. Unemployment is also near the highest since 2017 excluding the pandemic, although average wages continue running twice as fast as the Bank’s inflation target.