Canada’s GDP slips in April as manufacturing falters

Canada’s real GDP fell 0.1% in April, reversing a 0.2% increase in March, according to Statistics Canada.

The national economy was dragged down by a broad recession in goods-producing industries, which fell by 0.6%, led by a sharp drop in manufacturing.

Meanwhile, the services sector posted a tiny 0.1% increase, providing a partial offset as 10 of the 20 major manufacturing sectors gained.

According to Statistics Canada, the manufacturing sector’s April fall was its worst monthly performance since April 2021, with a 1.9% drop.

Durable goods manufacturing declined 2.2%, while non-durable goods production fell 1.6%.

The fall reflects a drop in both domestic output and international demand, particularly in light of current trade tensions with the US.

Manufacturing sector contracts sharply, motor vehicles hit hard

Manufacturing of durable goods fell for the first time in four months in April, as eight of ten subsectors lost ground. The largest decline since September 2021 was a fall for transportation equipment manufacturing, down 3.7%.

That was driven by a 21.6% plunge in the “other transportation equipment” category and a 5.2% pullback in motor vehicle manufacturing, which occurred at the same time as lower shipments of passenger cars and light trucks.

The drop was due in part to reduced output by some automakers as the threat of new U.S. tariffs on Canadian exports of motor vehicles lingered, Statistics Canada said.

Output of non-durable goods also softened, with food manufacturing taking the lead with a 3.6% drop, the steepest monthly decline from that sector in almost a year, while petroleum and coal products fell 5.9%.

The drop was also facilitated by refineries across Canada undergoing extensive maintenance and turnaround activity in April.

The wholesale trade and resource sectors add to the Drag

Wholesale commerce declined 1.9%, the largest monthly decline since June 2023. Seven out of nine subsectors lost money, with the motor vehicle and parts wholesalers segment falling the most, by 6.8%.

This coincided with decreasing import and export volumes. Wholesalers of equipment, supplies, and miscellaneous items also experienced reductions, reflecting broader weakness in international trade.

The mining, quarrying, and oil and gas extraction sectors were unchanged in April. Oil and gas extraction fell 0.6%, owing mostly to reductions in natural gas and conventional crude output.

Oil sands extraction remained steady, with maintenance operations offsetting increases in bitumen output. A brief stoppage of the Keystone pipeline due to a break slowed oil transportation and export business.

However, support services for oil and gas production increased by 4.8%, owing to increased drilling and rigging activities.

The services sector provides modest support

On the services front, public administration (+0.8%) experienced its greatest monthly increase in over a year, driven by a 2.2% increase in federal government activity.

According to Statistics Canada, this was driven by operational increases associated with Canada’s federal election. Health care and education services expanded marginally, contributing to the 0.4% growth in the public sector as a whole.

Financial markets were active in April, boosting the finance and insurance sector by 0.7%. Financial investment services jumped 3.5%, the most in more than a year, as market volatility increased following the April 2 announcement of US tariffs.

High trade volumes on Canadian equity markets persisted until mid-month, fueled by anxiety before turning optimistic once a 90-day tariff respite was announced.

Arts, leisure, and recreation saw a 2.8% increase, the greatest performance since early 2022. Spectator sports took the lead, with five Canadian NHL clubs making the playoffs for the first time since 2017.

Increased attendance and event activities caused a boost in the overall industry.

Advance estimates point to continued weakness in May

According to preliminary figures for May, real GDP fell another 0.1%. The flash estimate shows persistent weakness in public administration, mining, and retail trade, offset only somewhat by strength in real estate, rental and leasing. The final data for May will be published on July 31, 2025.

Canada’s energy business remains inextricably linked to U.S. demand. According to Statistics Canada’s Value Added in Exports database, the mining, quarrying, and oil and gas extraction sector will rely on the United States for 60% of its output and 42% of its jobs by 2023.

The oil sands industry, in particular, was the most export-reliant, with 87% of its production and workforce dependent on US demand—an increase from 81% in 2014.

Crude oil exports reached a record 240.4 million cubic metres in 2024, with 229.8 million going to the United States.

While shipments to other countries increased dramatically following the inauguration of the Trans Mountain pipeline extension, the United States remains the primary destination for Canadian oil, exposing the sector to major geopolitical and trade risks.

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