Canada GDP was stronger than expected in January, when it expanded at a monthly pace of 0.5 percent after contracting 0.1 percent in December, above Econoday's consensus of 0.3 percent. GDP increased 3.0 percent year-over-year.

The flash estimate for February points to a 0.3 percent increase, led by gains in mining, quarrying, and oil and gas extraction, manufacturing, and finance and insurance, offsetting declines in construction, wholesale trade, and accommodation and food services.

In January, gains were broad based, across 17 of 20 industries, with services up 0.6 percent and goods-producing industries up 0.4 percent.

Within services, accommodation and food was a top contributor to growth, with a 4.0 percent expansion. A few other sectors that contracted in December rebounded in January: wholesale trade was up 1.8 percent after declining 0.5 percent; transportation and warehousing recovered 1.9 percent after falling 1.1 percent; information and cultural industries rose 0.2 percent and finance and insurance advanced 0.3 percent, after both sectors contracted 0.4 percent in December. Management of companies and enterprises was the outlier, as it recorded a 3.2 percent decrease on the month.

Within goods-producing industries, mining, quarrying, and oil and gas extraction increased 1.1 percent after dropping 3.3 percent in December. Overall, energy was up 0.6 percent. Construction rose 0.7 percent and manufacturing 0.5 percent, with a 1.2 percent gain in durable manufacturing offsetting a 0.3 percent decrease in non-durables. Overall, industrial production expanded 0.4 percent in January. Meanwhile, utilities were down 1.8 percent and agriculture, forestry, fishing and hunting down 1.1 percent.

In its January Monetary Policy Report, the Bank of Canada projected a 0.5 percent GDP growth in the first quarter, for an annual expansion of 1.0 percent in 2023. In its March policy announcement, the central bank reaffirmed its expectation of ongoing activity weakness for the next couple of quarters. With the Canadian economy posting its largest monthly growth since March 2022, the central bank will remain vigilant, especially with Econoday Consensus Divergence Index at 51, indicative of an economy running well ahead of expectations, consistent with a higher tightening risk.

GDP for January is expected to rise a palpable 0.3 percent on the month versus a flat run of prior results.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. In contrast to most industrialised countries a monthly estimate is provided derived from the value added by labour and capital in transforming inputs purchased from other producers into that industry's output. Data for the reference month are usually released close to the end of the second month after the reference period.

Instead of producing an advanced quarterly GDP figure and revising it the following two months, Statistics Canada releases monthly estimates of real GDP at Basic Prices. This release breaks down real output by seven goods-producing industries and twelve service-producing industries, and includes special aggregations such as business sector, non-business sector, and industrial production.

The sources of data used for monthly and quarterly estimates often differ and leads to very different estimates for certain items, such as price deflators. As a result, the monthly figures are not perfectly correlated with the quarterly numbers. However, the monthly data do give some idea of where the quarter is headed and especially in an uncertain environment, they are closely watched. While industrial production is closely watched in the U.S., it is not in Canada especially since the economy has become increasingly dominated by services. However, the goods sector is more vulnerable to wide swings in output compared to services, and exports remain dominated by industrial output.