Canada’s Economic Growth Stalls in November, Fourth Quarter Contraction Possible
Canada’s economic growth experienced a stall in November, revealing significant challenges in goods-producing sectors. This slump comes after nearly a year marked by tariffs and trade uncertainties.
Overview of Economic Performance
According to recent data from Statistics Canada, the country’s Gross Domestic Product (GDP) remained flat month-over-month in November. This follows a contraction of 0.3% in October, defying analysts who anticipated a slight increase of 0.1% for November.
The downturn in the economy, particularly in goods-producing sectors, has raised concerns about potential recession indicators. If the current trends persist, Canada could experience a contraction of 0.5% in GDP during the fourth quarter, diverging from the Bank of Canada’s projections that hinted at no growth.
Factors Affecting Economic Growth
Several factors have contributed to this economic stagnation:
- U.S. tariffs on steel, automotive, lumber, and aluminum are inhibiting growth.
- A recent Bank of Canada survey indicated subdued business sentiment and decreasing investments.
- There are rising expectations of layoffs across various sectors.
Despite a projected increase in output of 0.1% for December, revisions are likely, affecting growth expectations for the upcoming year. The economy is projected to grow 1.3% in 2025, according to StatsCan.
Sector-Specific Insights
Services-producing sectors, which account for about three-quarters of the economic output, helped mitigate some of the downturn. Some notable performing sectors in November included:
- Retail trade
- Transportation and warehousing
- Educational services
However, not all sectors performed well. The wholesale trade sector saw a decline of 2.1%, marking its largest contraction since April of the previous year. Additionally, goods-producing industries contracted by 0.3%, with the manufacturing sector alone declining by 1.3% due to ongoing trade uncertainties and U.S. tariffs. Specifically, manufacturing output of motor vehicles and parts dropped by 6.4% due to a global semiconductor shortage.
Currency and Bond Market Reactions
Financial markets also responded to the economic news. The Canadian dollar weakened to C$1.3537 against the U.S. dollar, equivalent to 73.87 U.S. cents. Meanwhile, yields on two-year government bonds decreased by 0.5 basis points to 2.407%.
In summary, Canada’s economic growth has stalled significantly due to various external pressures and sector-specific challenges. Continued monitoring and strategic responses will be crucial for revitalizing growth in the coming months.
