Canada’s economy showed no growth in November as gains in services were fully offset by renewed weakness in goods producing industries, reinforcing signs that momentum faded sharply toward the end of the year. Data from Statistics Canada showed gross domestic product was unchanged from October, following a contraction in the previous month. The reading came in below market expectations and highlighted the drag from trade exposed sectors that have struggled amid prolonged tariff uncertainty. While service industries continued to provide some stability, the lack of overall expansion has increased concerns that the economy may have slipped into contraction during the fourth quarter, at a time when businesses remain cautious on investment and hiring.
The slowdown reflects pressure on industries most affected by U.S. trade measures, particularly manufacturing, which remains among the weakest areas of the economy. Output in the manufacturing sector fell sharply in November, driven in part by declines in motor vehicle and parts production. Trade related uncertainty has weighed on confidence across supply chains, while global factors such as semiconductor shortages have compounded domestic challenges. Other goods producing industries also posted declines, marking the third contraction in four months for the sector as a whole. These trends have offset otherwise steady demand in consumer facing and public services, limiting the economy’s ability to regain momentum.
Services producing industries continued to expand in November and accounted for most areas of growth, reflecting their dominant share of overall economic output. Retail trade, transportation and warehousing, and educational services recorded gains during the month, helping cushion the impact of weakness elsewhere. However, not all service sectors performed well, with wholesale trade posting its steepest decline in several months. The mixed performance underscores uneven conditions across the economy, as firms navigate higher costs, uncertain trade policy, and slowing global demand. Business surveys have pointed to subdued sentiment and rising expectations of layoffs, signaling that pressure may persist into early 2026.
Preliminary estimates suggest output edged slightly higher in December, though officials cautioned that the figure remains subject to revision. Even with a modest December increase, data indicate the economy may have contracted at an annualized pace in the fourth quarter, undershooting the central bank’s earlier expectations of flat growth. Two consecutive quarters of contraction would meet the definition of a technical recession. Financial markets reacted to the data with the Canadian dollar weakening against the U.S. dollar, while short term government bond yields eased. As policymakers assess the outlook, attention is turning to whether easing financial conditions and improving global demand can help stabilize growth in the months ahead.
