April 29, 2011 / 12:37 PM / 9 years ago

UPDATE 1-Canada economy shrinks unexpectedly in February

* Economy shrinks 0.2 percent in February

* Auto sector drags manufacturing and wholesale trade (Adds details)

OTTAWA, April 29 (Reuters) - A decline in manufacturing production caused Canada’s economy to shrink unexpectedly in February, reaffirming market expectations that the Bank of Canada will hold rates steady until the second half of the year.

Following two months of robust growth, gross domestic product slid 0.2 percent in February from January, Statistics Canada said on Friday. The slump is the first since September and the largest since May 2009, according to the agency.

Analysts surveyed by Reuters had on average forecast a flat reading for February GDP.

Manufacturing production fell 1.6 percent in the month following a sharp 2.5 percent increase in January with most of the weakness stemming from the auto sector. Overall goods-producing industries were down 0.6 percent.

At the same time wholesale was down 1 percent and transportation was off by 0.7 percent. However, the service sector overall was unchanged as strong consumer spending boosted retail sales. (Reporting by Louise Egan and Howaida Sorour, Editing by Chizu Nomiyama)

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