Canada's Economy Contracts as Key Sectors Stumble

Canada's GDP shrank 0.2% in November due to transportation and port work stoppages. December may see a rebound. The Bank of Canada anticipates 1.8% GDP growth for Q4. Factors such as interest rates, population decline, and potential U.S. tariffs loom over projections.

Statistics Canada reported Friday that the country's economy contracted more than anticipated in November, with significant shrinkage across various sectors caused by work stoppages in inland transportation and port activities.

The gross domestic product declined by 0.2% in November, a setback from the 0.3% growth in October, mainly due to decreased production in mining, oil sands extraction, and transportation.

However, preliminary estimates suggest a potential 0.2% GDP bounce back in December. This improvement is expected to be driven by gains in retail trade, manufacturing, and construction. The full December figures and fourth-quarter growth numbers will be released by Statscan next month.

The annualized fourth-quarter GDP growth aligns with the Bank of Canada's recent forecast of 1.8%. Despite rate cuts amounting to 200 basis points since June, the central bank remains watchful over economic growth's sustainability.

The bank recently revised its 2025 GDP growth forecast downward due to population declines, amidst concerns it could be further affected by potential 25% U.S. tariffs on Canadian imports.

In November, the service-producing industries noted a 0.1% decrease, with transportation and warehousing seeing a 1.3% contraction, marking its largest drop in two years due to postal service work stoppages and port labor actions.

For goods-producing industries, mining and quarrying, along with oil and gas extraction, faced a 1.6% drop.

(With inputs from agencies.)