Canada’s Economic Contraction in November

By Promit Mukherjee
OTTAWA (Reuters) – Canada’s economy contracted more than expected in November due to work stoppages in inland transportation and at ports, according to Statistics Canada.

The country’s gross domestic product (GDP) decreased by 0.2% in November from a 0.3% rise in October, primarily due to contractions in mining, quarrying, oil sands extraction, and transportation.

Analysts had predicted a 0.1% drop in GDP for November, but economists expect a recovery in December. A preliminary estimate suggests a 0.2% rebound in December, driven by increases in retail trade, manufacturing, and construction.

Currency swap markets indicated traders have slightly reduced the likelihood of a 25-basis-point rate cut by the Bank of Canada in March, now at 53.9%.

The Canadian dollar remained stable at C$1.4468, or 69.12 U.S. cents. December’s figures will be released next month alongside the fourth-quarter economic growth statistics. Initial estimates suggest the annualized fourth-quarter GDP could be 1.8%, in line with the Bank of Canada’s forecasts.

The central bank is wary of slow economic activity despite recent rate cuts totaling 200 basis points since June, now at 3%. Following this week’s 25-bps cut, Governor Tiff Macklem expressed that while growth is picking up, sustainability remains a concern.

The bank updated its 2025 GDP growth forecast downward to 1.8% from 2.1%, partly due to a population decline this year. If U.S. President Donald Trump enacts a 25% tariff on all Canadian imports, it could further impact growth forecasts.

Services-producing industries fell by 0.1% in November, led by a 1.3% decline in transportation and warehousing—the largest drop in two years—attributed to postal service work stoppages and labor actions at ports. Additionally, mining and quarrying, along with oil and gas extraction, saw a 1.6% decrease.