The consensus forecast is for a 0.2% gain in the monthly result, down sharply from January's +0.6%. And some economists are warning that there will be even worse results in the months ahead.

CIBC economist Avery Shenfeld says his forecast is in line with consensus, with February GDP likely to show "a modest 0.2% advance, but a drop looks to be in store for March based on what we saw in full time employment."

Canada's economy "had some big winners and equally big losers in February, netting out to a middling 0.2% rise in real GDP," Shenfeld said. "March doesn't look likely to continue that streak, with the earlier downtrend set to resume under the weight of slumping activity stateside."

March GDP could see "an outright decline," said Avery, given weakness in full time employment, and CIBC's expectations for a poor month for manufacturing and a weather hit to construction. The first quarter "started in a hole created by December's GDP dive," he said. "As a result, we expect real growth of only 1%.

Scotiabank economist Karen Cordes said her bank's official forecast is on consensus "but the risk is to the downside. A stronger number (than +0.2%) would be more surprising than a weaker one."

Retail sales and wholesale sales were both down considerably in February and the housing market has shown signs of cooling, Cordes said. "All the talk is about housing starts but look at the details," she said. "A lot of the starts are in the multi-unit sector. Singles have been declining since 2006."

Cordes said she expects the Wednesday GDP report likely will begin to show the signs of weakness in the economy that analysts have been forecasting for some time, "and I expect we'll see more weakness ahead."

Laurentian Bank economist Sebastien Lavoie said the February report will show an economy being pulled in opposite directions. Housing starts "skyrocketed" in the month, he said, and there was a short-lived rebound in manufacturing as car plants continued to make up for December shutdowns. Meanwhile wholesale and retail sales slumped in the month, Lavoie said.

He is looking for a 0.3% increase in GDP but added that the month-to-month results should be "taken with a grain of salt." For the year as a whole, Lavoie said Laurentian is forecasting a Canadian GDP gain of 1.3%, rising to 2.3% in 2009, as Canada continues to feel the effects of a U.S. recession which he said will be "quite long. That will keep Canada in the slow lane"

He doesn't expect to see Canada return to 3% economic growth until "sometime in 2010." In the meantime, he said, investors will have to learn "that patience is a virtue."

HSBC Canada market strategist Stewart Hall said much of the economic volatility that characterized the December and January reports is expected to fall out of the February numbers. Hall agrees with the consensus call of 0.2% GDP growth.

The energy sector and extraction industries are expected to have continued to grow, he said, and natural gas prices have moved "considerably higher in January and February." Manufacturing shipments were strong in the month, Hall said, and construction got a boost from housing sector activity.

On the other side of the equation, wholesale and retail activity contracted in the month "and will act as a drag on GDP," he said.

"From a policy standpoint, the bar on economic growth has been set pretty low by the (Bank of Canada) which suggests that soft GDP growth rates going forward into the second quarter are not expected to alter the view that the rate cycle in Canada is very nearly played out," Hall said.

By Geoff Matthews, This email address is being protected from spam bots, you need Javascript enabled to view it