The Canadian economy rose by 0.3% in February after increasing by 0.2% in January. Much of the growth in February was attributable to increased spending by consumers in retail stores and by continued strength in the demand for machinery and equipment by businesses, both domestic and abroad.

Spending on big-ticket items spurred retailing and wholesaling activity

Retailing activity increased a further 1.7% in February after rising by 2.3% in January. There were widespread increases across many store types, with particular strength in new and used car dealerships. Strong incentive programs by some carmakers helped propel new car sales in February, with unit sales jumping by 13%. The end of a strike in Quebec's liquor stores as well as stronger sales in most other provinces caused a sizeable jump in the beer, wine and liquor stores industry. Only supermarkets and general merchandise stores, including department stores, saw a decrease in activity.

Wholesaling activity rebounded by 1.4% in February after a decrease of 0.2% in January. Wholesalers of food and beverage products saw the largest increase in activity, recovering from the January drop. Increased foreign demand for potash, industrial chemicals, and machinery and equipment helped boost the output of wholesalers of these types of products. Wholesaling of motor vehicles and building supplies also increased. Wholesaling of oil products decreased in line with a reduction in crude petroleum extraction.

Industrial production pulled down by lower energy production

Industrial production (the output of factories, mines and utilities) decreased by 0.2% as an increase in manufacturing output (+0.2) was overshadowed by decreases in the mining, oil and gas extraction sector (-1.3%) and by utilities (-0.8%). A relatively warm February compared to previous months across many regions of the country and in the United States lowered the demand for electricity and natural gas. Energy sector output fell 1.0%, a second consecutive decline. In the United States, the index of industrial production rose by 0.2% with increases in the manufacturing and mining sectors tempered by reduced output by utilities.

Mining and oil and gas extraction gave ground

Mining and oil and gas extraction fell back by 1.3% in February. Despite the high prices for crude petroleum on international markets, continuing production problems in the tar sands reduced the output of crude oil and natural gas by 1.4%. Metal ore mines increased their output by 2.2%, with all types increasing except for gold and silver (-2.3%). Non-metallic mineral mines saw their output decrease by 5.0%. The output of potash was essentially flat but stood at a level nearly 15% higher than a year ago.

Construction activity edged down

Construction activity edged down by 0.1% in February. Residential construction declined for a third month in a row (-0.6%). Building of single detached dwellings and of apartment units were both down. Housing starts however recovered some of the ground lost in January, except in Quebec's urban areas which saw a further decrease. Sales of existing homes increased in February, raising the output of real estate agents and brokers by 1.8%.

Non-residential building construction activity increased by 0.3% in February. This is the second increase in the last three months since this sector peaked in June 2003. Construction of commercial and industrial buildings both increased, but there was a further decline in institutional units. There were large increases in the value of building permits for all types of non-residential buildings however.

Continued strength in durable goods manufacturing

Output in the manufacturing sector rose by 0.2% in February pushed by durable goods production (+0.6%). Only 9 out of the 21 major groups, accounting for 38% of manufacturing's value added, reported gains. Decreases were widespread but more concentrated in paper (-1.3%), sawmills (-1.6%), and food products (-0.6%).

The manufacturing of machinery increased by 2.4%, in part to satisfy foreign demand. There was particular strength in the production of agricultural, construction and mining machinery (+4.5%), metalworking (+5.3%) and other general purpose machinery (+4.0%). The output of computer and electronic products rose 2.3% with gains reported in most categories. The manufacturing of information and communication technologies goods reached its highest level since July 2001.

Primary metal manufacturing increased by 2.2% helped by the progressive resumption of output in primary production of aluminum (+4.4%) after a labour dispute curtailed the production of a smelter in the third quarter of 2004. Non-ferrous metal smelting and refining (+7.8%) rebounded in February with an increase in the production of uranium.

Continued strong demand for heavy-duty trucks fuelled the output of motor vehicles (+0.6%) as manufacturers adjusted their production of automobiles and light-duty motor vehicles to the demand for Canadian built models.

Other sectors

A surge in exports of wheat in February contributed to the jump in farm product warehousing and was also a factor in the increase in rail transportation and wholesale trade. Tourism-related industries benefited from an influx of travellers from countries other than the United States, with air transportation up by 1.7%, and accommodation services up by 1.5%. An increase in the volume of transactions on the Canadian stock exchanges helped raise output in the finance and insurance industries by 0.4%.