Canada’s economy showed modest growth in January, driven by gains in mining and oil and gas, but economists said the momentum may not last as global tensions and trade pressures weigh on the outlook.
According to Statistics Canada, the country’s GDP grew by 0.1 per cent in January, slightly exceeding expectations after a 0.2 per cent increase in December. The growth was largely fuelled by goods-producing industries, particularly mining, oil and gas extraction, which rose 1.2 per cent.
Increased crude oil production in Newfoundland and Labrador and Saskatchewan, along with higher natural gas output, helped offset declines in other sectors. Construction also posted gains, rising 1.1 per cent for a third consecutive month.
Not all sectors performed well.
Manufacturing declined during the same period, erasing gains made in December, while wholesale trade and transportation were also dragged down by weaker auto production and seasonal factors.
Moshe Lander, an economics professor at Concordia University, said the overall growth figure should not be seen as a sign of economic strength.
“January’s GDP was only slightly up. It’s not an indication of a very strong economy at all,” Lander said. “Even if you were to extend that growth through the entirety of 2025, it would still be below Canada’s long-run average.”
The resource sectors helped lift the economy in the short term, Lander said that relying on oil and gas growth comes with risks, especially as global conditions remain unstable.
“The economy is at a standstill,” he said, pointing to the broader impact of rising energy prices and geopolitical disruptions. “In the coming months, we’re going to see that it’s going to be negative.”
The gains in oil and gas come at a time when global crude prices are rising due to geopolitical tensions, including conflict in the Middle East.
While higher prices benefit energy-producing provinces such as Alberta, they increase costs for most Canadian households and businesses.
“For everybody but Alberta, it’s bad,” Lander said. “Oil and gas are an input, not an output. When input costs go up, that feeds into higher prices across the economy.”
Manufacturing, already under pressure, continues to struggle.
Economists said part of the decline is due to ongoing trade tensions and tariffs, especially those affecting steel and aluminum exports to the United States.
“It was clear that tariffs were not going to strengthen the sector, they were going to weaken it,” Lander said.
The full impact has only recently become visible after more than a year of pressure.
Beyond tariffs, Lander said that Canada’s manufacturing slowdown reflects a longer-term structural shift.
“As countries get richer, they move up the value chain,” he said. “Canada is naturally transitioning away from manufacturing and toward technology and service-based sectors.”
Despite January’s growth, risks remain for the months ahead.
Economists said that higher oil prices could drive inflation, forcing the Bank of Canada to raise interest rates even as the economy weakens.
“If they see that inflation is not temporary, they’re going to have to move aggressively,” Lander said.
Lander said that Canadians could face multiple rate hikes this year.
That could increase borrowing costs for mortgages, loans and credit cards, further straining households already dealing with affordability challenges.
“This is not telling people anything they don’t already know,” Lander said. “Cost of living and affordability remain major concerns, and they’re getting worse.”
Early data shows Canada’s economy might keep growing a little in February, but experts said the future is still uncertain.
For everyday Canadians, this could mean higher prices and more expensive loans, making it important for the government to watch the situation closely and take smart steps to help.
