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The Canadian winter put a chill on the economy’s hot start to 2019, as harsh weather and cool foreign demand contributed to a surprising 0.1-per-cent decline in gross domestic product in February.

The weaker-than-expected result added to the cautious tone surrounding the first quarter of the year, as the economy looks to be emerging haltingly and unevenly from the oil-led slowdown that ended 2018.

Statistics Canada’s monthly report showed that while 11 of 20 industry sectors posted growth, the economy was dragged down by a slump in the transportation sector, as well as declines in resource extraction and manufacturing.

Economists had expected a flat reading for the month after the economy had surged an encouraging 0.3 per cent in January. Despite indications that many sectors had bounced back to start the year from their late-2019 slump, earlier data on manufacturing and exports had pointed to a sluggish February.

The month’s poor weather in much of the country disrupted transportation, especially by rail, and weighed on both factory output and export shipments. Rail transportation plunged nearly 11 per cent in the month, slowed by weather and by a major derailment in British Columbia. Economists noted that the conditions also contributed to weaker home sales in the month, although the utilities sector got a lift from heavy heating demand.

Economists were a bit surprised by a slowdown in mining, which slumped 4.4 per cent amid tepid shipments to foreign markets, particularly the United States. Meanwhile, oil extraction also dipped slightly, even though Alberta reduced its government-imposed production cuts at the beginning of the month.

“Wintry weather had a negative impact, though growth wouldn’t have been much better than flat without that factor,” Josh Nye, senior economist at Royal Bank of Canada, said in a research report.

“The underlying message appears to be one of an economy still in the midst of a soft patch, but one driven by temporary factors,” Toronto-Dominion Bank senior economist Brian DePratto said in a research note.

The GDP report lends some credence to the Bank of Canada’s argument, contained in last week’s quarterly forecasts, that economic growth in the first quarter might have been weaker than most economists expected, but that it was weighed down by short-term impediments that would fade in the coming months. In discussing those forecasts in a news conference last week, Bank of Canada Governor Stephen Poloz specifically cited the weather-related rail slowdowns as a temporary drag on first-quarter economic activity.

Economists added that February could also prove a low point for oil’s contribution to GDP growth, as Alberta’s mandatory production cuts are gradually reduced over the coming months.

“Look for this sector to be neutral if not an upside [for GDP] going forward,” Bank of Nova Scotia economist Derek Holt said.

The Bank of Canada has estimated that first-quarter GDP growth was just 0.3 per cent annualized, even slower than the 0.4 per cent posted in the 2018 fourth quarter. Most economists believe the central bank’s forecast looks overconservative – although many did trim their own estimates in the wake of the disappointing February result. Private-sector economists now believe that first-quarter growth is on track for roughly 0.7 per cent annualized.

The Bank of Canada has forecast that the economy will pick up in the current quarter, to about 1.3 per cent, and will strengthen further as the year progresses. Mr. Poloz stood by that position in testimony to the House of Commons finance committee Tuesday, just hours after the GDP report was released.

“There is good reason to believe that the economy will accelerate in the second half of this year,” he said.

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