Canada’s Economy Posts Modest Growth in January
Canada’s economy continued to expand at a modest pace at the start of the year, supported by strength in the energy and construction sectors. Real GDP rose by 0.1% in January, following an upwardly revised 0.2% increase in December 2025.
Energy Sector Drives Growth
Growth was led by goods-producing industries, which increased by 0.2%, largely due to a rebound in oil and gas extraction. According to CIBC economist Katherine Judge, the January GDP figure came slightly above expectations and initial estimates.
The energy sector recorded a strong 1.2% gain, driven by higher crude oil production in regions such as Newfoundland and Labrador and Saskatchewan.
Manufacturing Weakness Weighs on Economy
Despite gains in energy, manufacturing declined by 1.4%, mainly due to extended holiday shutdowns at automotive plants in Ontario. This slowdown in the auto sector had a ripple effect across the economy, impacting wholesale trade and machinery production.
While gains in sectors such as mining, quarrying, and construction helped offset the decline, manufacturing remained a key drag on overall growth.
Construction Sector Remains Strong
The construction industry continued to perform well, marking its third consecutive monthly increase with a 1.1% rise. Growth was supported by strong activity in residential construction and engineering projects, which reached new highs.
However, the real estate sector showed signs of cooling, posting its first decline in ten months.
Weather Disruptions Impact Services
Severe winter conditions disrupted service-sector activity, particularly in transportation and air travel. These seasonal factors temporarily weighed on overall economic performance.
Financial Sector Boosted by Foreign Investment
Strong foreign demand for Canadian bonds supported the financial sector, which recorded its best performance since late 2025. Increased international investment helped the finance and insurance industry grow by 0.5% during the month.
Outlook: Gradual Recovery Ahead
Preliminary data from Statistics Canada suggests GDP may have risen by 0.2% in February. This keeps first-quarter growth broadly aligned with the Bank of Canada forecast of just under 2%.
Overall, while challenges remain in manufacturing and services, the broader economic outlook points to steady, moderate growth.
