Canada's economy showed little net movement in November as a marked deterioration in industrial production counteracted modest gains across several service-oriented sectors. Statistics Canada reported that real gross domestic product was essentially unchanged for the month, following a 0.3% contraction in October.
The manufacturing sector was a principal drag, declining 1.3% in November. Statistics Canada highlighted that output in motor vehicle and parts manufacturing fell 6.4%, saying activity was largely constrained by a global semiconductor shortage that impeded assembly lines.
Wholesale trade also weakened sharply, contracting 2.1% in the largest monthly drop since early last year. Statistics Canada linked this downturn to the automotive chain, noting that activity at motor vehicle and parts wholesalers reflected lower activity in both the motor vehicle and used motor vehicle parts and accessories industry groups.
On the upside, the retail sector provided a positive offset, expanding 1.3% with growth across all subsectors. The rebound in retail was supported in part by a recovery in food and beverage sales after regional labor disputes in Western Canada were resolved.
Public sector activity rose 0.4% in November, driven by a return to routine in educational services. Statistics Canada attributed growth in this component largely to a 1.7% increase in elementary and secondary schools as classes resumed in Alberta following the end of a teachers' strike.
The transportation and warehousing sector expanded 0.9%, buoyed by an outsized 41.7% surge in postal services. That spike reflected the resumption of mail and parcel delivery activities after all job actions were suspended on November 21 following a tentative union agreement.
Agriculture and forestry continued to slide, falling 1.1% as both timber and crop production weakened. Forestry activity reached record lows for the November period amid softness in global lumber markets and sawmill curtailments.
Early indicators for December point to a modest 0.1% uptick, yet the broader quarterly picture remains one of limited momentum. Based on the monthly releases, Statistics Canada figures suggest the economy likely contracted 0.1% in the fourth quarter, which would leave total annual growth for 2025 at 1.3%.
Commenting on the data, CIBC economist Andrew Grantham said: "Overall today’s data are unlikely weak enough to revive talks for further interest rate cuts by the Bank, but it is clear that rates will need to be held at stimulative levels for a while to drive a recovery amid the continued uncertain economic environment." The remark came shortly after the November figures were published.
Summary
November GDP in Canada was unchanged as a 1.3% decline in manufacturing, including a 6.4% drop in motor vehicle and parts output tied to a semiconductor shortage, offset a 1.3% rise in retail and gains in public services and transportation. Wholesale trade fell 2.1%, while agriculture and forestry decreased 1.1%. Early December data show a 0.1% gain, but the fourth quarter likely contracted 0.1%, leaving 2025 growth at 1.3%.
Key points
- Manufacturing and wholesale weakness - Manufacturing fell 1.3% and wholesale trade dipped 2.1%, largely due to disruptions in the automotive supply chain, including a 6.4% decline in motor vehicle and parts manufacturing.
- Service-sector offsets - Retail sales rose 1.3% and public sector activity increased 0.4%, with elementary and secondary schools up 1.7% as classes resumed in Alberta; transportation and warehousing rose 0.9%, led by a 41.7% jump in postal services.
- Quarterly and annual outlook - Early December data suggest a 0.1% rise, but the final quarter likely contracted 0.1%, leaving annual growth for 2025 at 1.3%.
Risks and uncertainties
- Persistent supply-chain constraints - The global semiconductor shortage that curtailed motor vehicle assembly poses ongoing downside risk for manufacturing output and related wholesale activity.
- Sector-specific fragility - Continued softness in global lumber markets and sawmill cutbacks contributed to declines in forestry and agriculture, which could weigh on regional economies tied to these industries.
- Labour disruptions - Although mail and parcel services rebounded after job actions were suspended on November 21, similar labour disputes could re-emerge and disrupt transportation and retail flows.