After a "modest" growth of 0.1% month over month in January, which was revised upward from a flat reading, Quebec's economic expansion was more robust in February, with a 0.4% month-over-month increase, said National Bank of Canada.
This marked the third consecutive month of growth for the province's gross domestic product and a larger gain than that observed across Canada as a whole, noted the bank.
As a result, in February the Quebec economy was only 0.1% below its January 2025 peak before the trade conflict with the United States, stated National Bank. Despite this recovery, Quebec's GDP remains more heavily impacted than the country as a whole, particularly due to the size of its manufacturing sector, with Canadian GDP having grown by 0.8% over the same period.
The strong performance of the Quebec economy in February was driven by a significant 0.9% month-over-month gain in the goods sector, as well as a 0.3% increase in services. It is also worth noting that the expansion of the Quebec economy over the past three months has been fueled by consecutive increases in both sectors.
Nevertheless, the goods sector remained 2.8% below its January 2025 level in February, while the services sector was up 0.8%. Among the highlights of February was a significant 1.9% rebound in the public services subsector following a 1.6% drop in January.
Also noteworthy is the 1.4% increase in the manufacturing sector in February, marking the third consecutive monthly gain and the largest monthly increase since June 2022. Although this development is welcome, manufacturing output remains 3.9% below January 2025 levels and 7.4% below its post-COVID peak in June 2022.
While Quebec's economy appeared to be gaining momentum at the onset of the conflict in the Middle East, recent labor market data for March and April indicate a sharp slowdown in the province's job market, added the bank. In fact, nearly half of the job losses nationwide since the start of the year have occurred in Quebec, and the province's unemployment rate has jumped by 0.8 percentage point since the trade conflict began -- the sharpest deterioration among all Canadian provinces.
In addition, uncertainty surrounding the renewal of the CUSMA trade deal and the loss of household purchasing power due to the war in Iran represent obstacles to growth in the coming months, according to National Bank.
That said, the high household savings rate in Quebec, along with the resilience of the real estate market and the province's significant economic diversification, are factors that will help Quebec's economy weather these headwinds.