A recovery in automobile production during February contributed to increased sales in both Canada's manufacturing and wholesale trade sectors.
According to data released on Wednesday, seasonally adjusted manufacturing sales rose by 3.6% month-over-month to CAD 71.19 billion (approximately USD 51.7 billion). This increase was slightly below the preliminary estimate of 3.8%, but it reversed a larger decline in January, where sales were revised downward to a 3.1% decrease.
Wholesale trade also saw improvement in February, with sales increasing by 2% to CAD 86.77 billion. This growth, though slightly lower than the earlier projection of 2.3%, followed a 1.1% decline at the beginning of the year.
In volume terms, manufacturing sales increased by 3.4% month-over-month but declined 2.7% year-over-year. Wholesale trade volumes rose 1.1% from the previous month but fell 1.9% compared to the same period last year.
The strong February figures provide a positive signal for the Canadian economy, which has been facing subdued growth expectations for the year. However, these numbers may already be somewhat dated, given that escalating conflict in the Middle East has driven up energy costs, casting a shadow over economic prospects. Preliminary data from Statistics Canada indicated that industry-level GDP grew by 0.2% month-over-month in the January-February period, building on a modest 0.1% increase in January. This suggests the economy may be on track for a recovery in the first quarter, after contracting at an annualized rate of 0.6% in the fourth quarter of 2025.
Among the 21 industries tracked, 12 recorded higher manufacturing sales in February. The transportation equipment sector was the primary driver, surging by 18.8%. This rebound followed a weak January, which was attributed to extended shutdowns at several automobile assembly plants for winter maintenance and retooling. Motor vehicle sales soared by over 40% in February, while exports of vehicles and parts increased by just over 30%.
Boosted by higher prices and volumes, machinery sales also recovered. Primary metal product sales rose, largely due to strong demand for non-ferrous metals. Conversely, chemical product sales fell to their lowest level since July of last year, partly because of a decrease in pharmaceutical sales.
In the wholesale sector, which represents the largest component of Canada's service industry, five out of seven subsectors posted sales gains (excluding petroleum products). Wholesale sales of motor vehicles and parts climbed 6.1%, aided by easing supply chain pressures. The food, beverage, and tobacco sector also saw a rebound, while sales of personal and household goods hit a record high, driven largely by trade in pharmaceuticals and medical supplies.
Manufacturers' inventories increased by 0.6% to CAD 121.86 billion, primarily due to higher stocks in the machinery, food, and plastic and rubber products industries. In contrast, wholesale inventories declined by 0.3% to CAD 135.37 billion, with the most significant drop occurring in the motor vehicle and parts sector.
According to Bradley Saunders, North America economist at Capital Economics, the auto-led rebound extends the Canadian economy's solid start to the year. "Overall, today’s data supports existing GDP growth projections," he noted.
The conflict involving Iran introduces additional uncertainty for the Canadian economy, which is already contending with trade uncertainties and concerns surrounding the upcoming review of the United States-Mexico-Canada Agreement.
The Bank of Canada is scheduled to update its economic forecasts later this month during its next interest rate decision. While the central bank has indicated that rising oil prices should boost export revenues and support GDP, it also notes that higher energy costs could dampen consumer spending and increase operating expenses for many businesses.