Canada’s economy stalls in November, preliminary data points to Q4 contraction
Monthly GDP was flat in November as services growth offset weakness in goods-producing sectors. Early estimates show a 0.5% annual decline in Q4.
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By Torontoer Staff
Canada’s economic growth stalled in November, with expansions in services offset by declines in goods-producing industries, Statistics Canada reported Friday. The agency said gross domestic product was unchanged from October to November, following a 0.3 per cent contraction the month before.
On a preliminary basis, Statistics Canada said output was expected to edge 0.1 per cent higher in December, but cautioned the estimate may be revised. Using monthly GDP by industry data, the agency’s figures imply an annual growth contraction of 0.5 per cent in the fourth quarter.
Services propped up activity while goods lagged
Services-producing industries, which account for roughly three quarters of Canadian output, were the main driver of November’s growth. Retail trade, transportation and warehousing, and educational services led gains for the month. Those gains, however, were not broad enough to offset weakness elsewhere.
Wholesale trade fell 2.1 per cent, its largest drop since April of the previous year. Goods-producing industries contracted 0.3 per cent in November, marking the third such monthly decline in four months.
Manufacturing and agriculture felt the impact
Manufacturing output, which makes up more than 8 per cent of GDP, fell 1.3 per cent in November. Motor vehicle and parts manufacturing declined 6.4 per cent, a drop Statistics Canada attributed largely to a global semiconductor shortage. The agriculture, forestry, fishing and hunting subsector contracted 1.1 per cent.
Industries exposed to U.S. tariffs — notably steel, aluminium, lumber and some automotive segments — have seen output pressured by higher costs and trade uncertainty. That stress has not spread evenly across the economy, but it has weighed on investment and business sentiment.
Market reaction and policy concerns
Markets reacted to the data with a modest move in the currency and government bond yields. The Canadian dollar weakened to $1.3537 per U.S. dollar, or 73.87 U.S. cents. Yields on two-year government bonds were down slightly to 2.407 per cent.
A recent Bank of Canada business survey showed subdued sentiment, lower investment intentions and expectations of layoffs among companies, all of which feed into the central bank’s assessment of near-term growth prospects.
The still sluggish momentum towards quarter end may be a concern, as monthly growth rates will need to accelerate for the economy to achieve the near 2% MPR forecast for Q1.
Andrew Grantham, senior economist, CIBC Capital Markets
Where the numbers could move
Final reported quarterly GDP uses income and expenditure data and can differ from estimates derived from GDP by industry. Statistics Canada also provided its annual forecast for 2025, expecting the economy to grow 1.3 per cent for the year.
Analysts polled ahead of the release had expected a small monthly increase of 0.1 per cent for November, so the flat result undershot consensus. If the preliminary estimate of a 0.5 per cent annual decline in Q4 is confirmed by final quarterly numbers, and if the prior quarter remains in contraction, Canada would meet the technical definition of a recession.
- Monthly GDP: 0.0% in November (after -0.3% in October)
- Preliminary December estimate: +0.1%
- Implied annual Q4 growth: -0.5% (preliminary)
- Manufacturing: -1.3% in November
- Motor vehicle manufacturing: -6.4% in November
Policymakers and businesses will watch incoming monthly data for signs of firming in activity. Accelerating monthly growth in early 2025 would be necessary for Canada to reach the Bank of Canada’s near 2 per cent first-quarter forecast using monthly industry figures.
Statistics Canada’s monthly and quarterly measures offer different lenses on the economy; both will be important as final Q4 data and early Q1 reports arrive in the coming weeks.
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