Weaker-than-expected activity in the wholesale and manufacturing sectors weighed heavily on the Canadian economy in February, according to data released by Statistics Canada today.

Gross domestic product declined 0.2% for the month, continuing at a much lower pace than in the first half of 2007, the federal agency said.

The market had been expecting a rise of 0.2% for the month.

“There is a chance that GDP could rebound somewhat in March, and that part of February’s weakness was due to the poor weather seen through most of Eastern Canada,” wrote Jacqui Douglas, economics strategist at TD Securities. “But even so, it looks like Q1 GDP will be hard-pressed to meet the Bank of Canada’s forecast, which supports our case that there’s still plenty of room to go on the Bank’s rate cutting path.”

Wholesaling activity fell 1.4% in February after moving ahead significantly in January. According to Stats Can, this sector has shown an upward trend despite some large fluctuations in recent months.

The country’s troubled manufacturing sector saw value added fall 0.7% in February, with the durable and non-durable goods accounting almost equally for the decline.

Other sectors, such as retail trade, oil and gas extraction and exploration, transportation and finance also saw notable declines, Stats Can said.

There was a 5.1% drop in output from petroleum refineries, which Stats Can attributes to unscheduled maintenance shutdowns in February at some refineries in the West.

Activity in the energy sector fell 0.9% in February. The oil and gas extraction industry contracted 0.7%, dragged down by a decrease in natural gas extraction, while exports and storage of natural gas declined. As well, exports of crude oil were up substantially.

Meanwhile, the output of the mining sector excluding oil and gas edged up 0.1% in February.

As well, the report noted that the home resale market fell considerably for the month. More than half of this decrease came from Ontario where the agency said weather may have played a role.

Activities in the finance and insurance sector dipped 0.2%, Stats Can said, as the volume of transactions on the stock exchanges decreased.

“The combination of tighter credit conditions and weakening U.S. demand for Canadian exports points to the economy continuing to grow at a relatively subdued pace in the second quarter, although by our reckoning the strength in domestic demand will take up the slack from the flagging export sector and the economy will continue to grow,” said Dawn Desjardins, senior economist at RBC, in a morning commentary.