Canada's economic growth stalled in November, could contract in fourth quarter

By Promit Mukherjee

OTTAWA, Jan 30 (Reuters) - Canada's economic growth stalled in November as an expansion in services was offset by weakness in goods-producing industries, data showed on Friday, as Canada's economy slows down after almost a year of tariffs and trade uncertainty.

Gross domestic product was flat month-on-month in November, after a 0.3% contraction in October, Statistics Canada said.

Analysts polled by Reuters had forecast marginal growth of 0.1%.

U.S. President Donald Trump's tariffs on steel, automotive, lumber, and aluminum have hobbled output in these sectors.

While the tariff malaise has largely not spread beyond these sectors, a recent Bank of Canada survey showed that business sentiment was subdued, investment was down, and companies expected layoffs.

On a preliminary basis, Statistics Canada said output was expected to edge 0.1% higher in December, though the agency cautioned the estimate could be revised.

November's figures indicate an annual growth contraction of 0.5% in the fourth quarter, undershooting the Bank of Canada's most recent forecast of no growth in the final three months of the year, based on monthly GDP by industry data.

Two consecutive quarters of contraction would constitute a technical recession.

Canada's economy is expected to have grown 1.3% in 2025, StatsCan said.

Final reported quarterly GDP numbers are based on income and expenditure and can differ from the estimate calculated from GDP by industry.

"The still sluggish momentum towards quarter end may be a concern, as monthly growth rates will need to accelerate for the economy to achieve the (Bank of Canada's) near 2% MPR forecast for Q1," Andrew Grantham, senior economist at CIBC Capital Markets, wrote in a note.

SECTOR PERFORMANCE

Services‑producing industries, which account for roughly three quarters of economic output, mainly drove growth in November.

Retail trade, transportation and warehousing and educational services were the top three performing sectors.

However, wholesale trade declined 2.1%, its largest contraction since April last year, the statistics agency said.

The strength in services was offset by a 0.3% contraction in goods-producing industries, the third such contraction in four months.

Manufacturing output, which contributes over 8% of GDP, contracted 1.3%. The industry remains among the most exposed to trade uncertainty and U.S. tariffs and global trends.

Output of motor vehicles and parts manufacturing shrank 6.4% owing largely to a global semiconductor shortage, StatsCan said.

The drop in manufacturing was closely followed by the agriculture, forestry, fishing and hunting sub sector, which contracted 1.1%, the agency said.

The Canadian dollar CAD= weakened 0.36% to C$1.3537 to the U.S. dollar, or 73.87 U.S. cents. Yields on the two-year government bonds CA2YT=RR were down 0.5 basis points to 2.407%.