January 31, 2025 – Canada’s economy shrank by 0.2% in November, marking the largest monthly contraction since December 2023, according to new data released by Statistics Canada. The decline was steeper than expected, surpassing analysts’ predictions of a 0.1% drop.
The economic downturn follows a 0.3% growth in October, but November’s slowdown was largely driven by decreased output in key sectors, including mining, quarrying, oil sands extraction, and transportation. A total of 13 out of 20 sectors recorded declines, highlighting the broad-based nature of the contraction.
Transportation and Energy Sectors Hit Hard
The services-producing industries contracted by 0.1%, with transportation and warehousing experiencing the sharpest decline at 1.3%—the most significant drop in two years. Statistics Canada attributed this to labour disruptions, including postal service work stoppages and port strikes, which disrupted supply chains and economic activity.
On the goods-producing side, mining, quarrying, and oil and gas extraction posted a notable decline of 1.6%, further weighing on overall economic performance.
Economic Rebound Expected in December
Despite November’s contraction, preliminary estimates suggest a modest recovery in December, with GDP expected to rise by 0.2%. This improvement is likely to be driven by gains in retail trade, manufacturing, and construction, according to Statistics Canada.
The final figures for December, along with the fourth-quarter economic growth data, will be published next month. Initial estimates project an annualized fourth-quarter GDP growth of 1.8%, aligning closely with the Bank of Canada’s latest forecasts.
Bank of Canada’s Outlook and Policy Adjustments
The Bank of Canada has been closely monitoring economic activity, particularly as it moves to ease monetary policy. Since June, the central bank has cut interest rates by a cumulative 200 basis points, bringing them down to 3%.
Despite the recent contraction, Bank of Canada Governor Tiff Macklem emphasized that economic growth is beginning to pick up, though policymakers want to see sustained momentum before making further adjustments.
Looking ahead, the central bank has revised its 2025 GDP growth forecast downward from 2.1% to 1.8%, citing concerns over a slowing population growth rate. Additionally, potential trade tensions with the U.S. could pose further risks—particularly if former President Donald Trump, should he return to office, implements a proposed 25% tariff on all Canadian imports.
As Canada navigates economic headwinds, policymakers and businesses will be watching closely for signs of stability and sustained growth in the months ahead.
