Canada's economy declined 0.2 per cent in February, hurt by a decline in manufacturing and wholesale trade.

Statistics Canada said the economy declined in the month following a rise of 0.5 per cent in January.

Canada's economy declined 0.2 per cent in February hurt by manufacturing. (Canadian Press)

The economy fell to a seasonally adjusted annual rate of $1.26 trillion in February, Statistics Canada said. This was weaker than expected by economists, who expected no change.

Still, economists believe the economy will post a healthy quarterly gain when the full numbers are reported next month.

"The drop was a little bit weaker than expected, but because of that earlier strength, it still maps to a solid quarterly increase," said Paul Ferley, assistant chief economist at RBC, in Toronto.

Ferley is calling for a quarterly increase of 3.7 per cent, and reiterated he is "comfortable" with that forecast, despite the drop in February.

"We are not anticipating the slowing trend will continue. We are expecting a March number consistent with this forecast of some recovery from the weakness in February," Ferley said.

The decline in the country's gross domestic product was largely a result of a decrease in manufacturing which resulted in a 0.6 per cent decline in goods-producing industries.

StatsCan said service producing industries were essentially unchanged as increases in retail trade, professional and financial services as well as in the public sector were offset by decreases in wholesale trade and transportation services.

After a 2.5 per cent increase in January, manufacturing fell 1.6 per cent in February, with 16 of the 21 major groups decreasing. The reduction was broadly based in both durable and non-durable goods, with manufacturers of motor vehicles and associated parts, machinery and fabricated metal products recording the largest decreases. Conversely, wood product manufacturing increased.

Wholesale trade

Meanwhile, wholesale trade fell 1.0 per cent in February following four consecutive monthly increases.

The majority of the subsectors reported declines, with motor vehicles leading the way. Conversely, retail trade was up 0.6 per cent, mainly as a result of increases at clothing and accessories stores.

The finance and insurance sector grew 0.2 per cent in February, primarily a result of lending and sales of mutual funds and higher volume of trading on stock exchanges. Lower output was recorded for insurance carriers.

Construction activity inched up 0.1 per cent, helped by non-residential building construction and engineering and repair work, while residential construction was unchanged, as drops in single dwellings and renovations were offset by increases in other types of dwellings.

The output of real estate agents and brokers decreased following six straight months of increases, reflecting a reduction in sales of existing homes in all provinces except British Columbia.

Mining, oil and gas extraction was unchanged in February as advances in mining and support activities were offset by a 0.4 per cent decline in oil and gas extraction. A boost in copper, nickel, lead, and zinc production led the gains.