Canada’s Economy Stagnates in November; 2025 Fourth Quarter Decline Possible
In recent data released by Statistics Canada, the country’s economy experienced stagnation in November, suggesting potential challenges ahead. This standstill is attributed to a decline in goods-producing industries, overshadowing any growth in the service sector.
Canada’s Economic Performance in November
Analysis of the gross domestic product (GDP) revealed no growth in November, in contrast to a contraction of 0.3 percent in October. Surprisingly, this outcome was at odds with analysts’ predictions of a slight 0.1 percent growth.
Influence of Tariffs on Economic Output
The economic impact of U.S. tariffs imposed by President Donald Trump on sectors such as steel, automotive, lumber, and aluminum has considerably hindered production. This tariff-induced strain has not extended widely but has stirred concerns about overall business sentiment within Canada, as suggested by a recent survey from the Bank of Canada. Key observations include:
- Subdued business sentiment among companies.
- A decline in investments.
- Anticipation of potential layoffs.
Forecast for December and the Fourth Quarter
Looking forward, Statistics Canada projected a modest increase of 0.1 percent for December, although they advised that this preliminary estimate might be subject to revisions. The stagnation in November has implications for fourth-quarter growth, which is anticipated to decelerate by 0.5 percent on an annualized basis.
Such a downward trend raises the specter of a technical recession if Canada were to experience two consecutive quarters of negative growth. Overall, full-year growth is estimated at 1.3 percent for 2025.
Sector-Specific Insights
The mixed performance across different sectors is notable. Growth in November was primarily related to services-producing industries, which represent about three-quarters of the country’s economic output. Key sectors showing positive growth included:
- Retail trade
- Transportation and warehousing
- Educational services
However, the services sector was marred by a significant decline in wholesale trade, which fell by 2.1 percent, marking its largest contraction since April. In contrast, goods-producing industries decreased by 0.3 percent, marking their third contraction within four months.
Manufacturing Challenges
Manufacturing, which constitutes over eight percent of Canada’s GDP, suffered a substantial drop of 1.3 percent, heavily influenced by ongoing trade uncertainties and global market trends. Particularly, the output from motor vehicle and parts manufacturing plummeted by 6.4 percent due to a global semiconductor shortage.
Additionally, the agriculture, forestry, fishing, and hunting sector also faced challenges, experiencing a decline of 1.1 percent.
This stagnation in Canada’s economy underlines the complex interplay of domestic and international factors that continue to shape economic outcomes across various sectors.
