Canada's economy contracts by 0.2% in November

Canada's economy contracted by 0.2 per cent in November, more than expected and the largest monthly contraction since December 2023, Statistics Canada said on Friday.

This shrinkage follows a 0.3 per cent increase in October, and was led by a drop in output in mining, quarrying, oil sands extraction and transportation, among others.

Overall, there were broad-based declines in November, as 13 of 20 sectors contracted. A majority of sectors shrank due to work stoppages across inland transportation and at ports.

The services-producing industries contracted by 0.1 per cent, with transportation and warehousing leading the drop with a contraction of 1.3 per cent, its largest decline in two years. This was led by work stoppages in postal services and labour actions at ports, StatsCan said.

Within the goods-producing industries, mining and quarrying and oil and gas extraction dropped by 1.6 per cent.

Analysts polled by Reuters had estimated the GDP to drop by 0.1 per cent in November and economists foresee a bounce-back in December.

A preliminary estimate shows that the GDP is likely to rebound by 0.2 per cent in December, led by increases in retail trade, manufacturing and construction, the statistics agency said.

The December figures will be announced next month, when StatsCan will also publish the fourth-quarter economic growth number.

According to its initial estimate, the annualized fourth quarter GDP is likely to be 1.8 per cent, or similar to what the Bank of Canada had forecast in its latest projections published this week.

The central bank has been concerned about the pick-up in economic activity despite several rounds of interest rate cuts. It has cut rates by a cumulative 200 basis points since June, to three per cent.

After announcing a 25-basis-point cut this week, Bank of Canada governor Tiff Macklem said growth was picking up, but that the bank would want it to be sustained.

The bank revised its 2025 GDP growth forecast downward to 1.8 per cent from 2.1 per cent earlier, especially led by a decline in population this year.

The growth forecast figures could be further dented if U.S. President Donald Trump decides to slap 25 per cent tariffs on all Canadian imports.