By Promit Mukherjee
OTTAWA, March 31 (Reuters) - The Canadian economy eked out modest growth in January, with monthly gross domestic product rising slightly as strength in most goods-producing industries offset lingering manufacturing weakness, data showed on Tuesday.
January's GDP rose by 0.1% on a monthly basis after a 0.2% gain in December, Statistics Canada said, pointing to a fragile start to the year.
An advance estimate, which is usually prone to change, showed that the economy might expand by
0.2% in February.
Analysts polled by Reuters had forecast no growth in January.
Canada's economy has struggled in the wake of tariffs imposed by President Donald Trump on the steel, automotive, aluminum, lumber and copper sectors among others. This has broadly hit Canada's manufacturing output.
While exemptions under a free-trade deal between the United States, Mexico and Canada have helped other sectors, growth has been largely muted, with the economy contracting in the fourth quarter.
Goods-producing industries, which account for a quarter of GDP, grew by 0.2% in January, similar to the previous month.
Mining, quarrying, construction and oil and gas extraction were the biggest growth drivers, helping to offset a 1.4% drop in manufacturing growth in January, StatsCan said.
The construction sector expanded for the third time in a row in January. The drop in manufacturing, the second-biggest contributor to monthly GDP, wiped out all the growth seen in December.
Services industries such as real estate, finance and healthcare are the biggest contributors to the Canadian economy, but growth in this category stalled in January, the statistics agency said.
Wholesale trade, transportation and real estate sectors shrank in January, offsetting growth in some major economic contributors such as retail, educational services and finance and insurance.
Overall, nine of the 20 industrial sectors recorded growth in January, StatsCan said.
Economists have said that growth could take a bigger hit in the coming months as high crude oil prices resulting from the Iran war curtail consumer spending and push up inflation.
It could also force the Bank of Canada to raise interest rates at a time of economic weakness.
Money markets expect no change in interest rates at the BoC's next meeting in April but are pricing in one increase of 25 basis points in the second half of the year.
The Canadian dollar was down 0.07% at C$1.3932 to the U.S. dollar, or 71.78 U.S. cents. Yields on two-year government bonds were down 4.7 basis points at 2.668%.
(Reporting by Promit MukherjeeEditing by David Goodman)
