The Canadian economy expanded by 0.2 percent in February, half the pace of the 0.4 percent expected in an Econoday survey. The reading was made even weaker by a downward revision to January's growth estimate now at 0.5 percent, down from 0.6 percent initially reported.

The advance estimate for March points to a flat reading which would put first quarter GDP growth at 0.6 percent.

Today's report leaves interest rate cuts on the table, with Econoday's Relative Performance Index pointing to building easing risk. That being said, how the weaker-than-expected growth performance eases inflation will matter more. The Bank of Canada projects real GDP to grow at an annual pace of 2.8 percent in the first quarter and 1.5 percent in the second quarter.

In February, 12 of 20 sectors increased on the month. Services were up 0.2 percent while goods-producing industries were flat after contracting 0.1 percent in January. Utilities fell 2.6 percent while mining, quarrying and oil and gas extraction rose 2.5 percent. Manufacturing was down 0.4 percent, led by a 1.0 percent drop in nondurables.

The advance in services was led by a 1.4 percent gain in transportation and warehousing. The public sector rose 0.2 percent after 1.9 percent in January. Finance and insurance increased 0.3 percent, rising for a third consecutive month.

After January's stronger-than-expected 0.6 percent jump, GDP in February is expected to rise 0.4 percent.

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.