OTTAWA – The Canadian economy contracted in November, but preliminary estimates point to a rebound at the end of the year as the country faces an uncertain future with U.S. President Donald Trump threatening to impose tariffs on Canadian goods as early as Saturday.
Statistics Canada said Friday real gross domestic product decreased 0.2 per cent in November, the largest monthly contraction since December 2023.
However, its preliminary estimate for December pointed to an increase of 0.2 per cent, suggesting an annualized growth rate of 1.8 per cent in the fourth quarter of 2024.
If the reading for the final three months of the year holds up when Statistics Canada releases its official figures on Feb. 28, it will be a pick up from an annual growth rate of one per cent in the third quarter.
Benjamin Reitzes, managing director and Canadian rates and macro strategist at BMO, said the preliminary reading for the fourth quarter matched the Bank of Canada’s estimate.
“November was soft, but there were a few special factors weighing that will reverse over the next two months,” Reitzes said.
“This is all old news, though, as everyone is on tariff watch at the moment. That’s all that matters near-term, whether we like it or not.”
Trump has signalled he’s ready to impose 25 per cent tariffs on Canadian goods as early as Saturday.
He said initially the tariffs were in response to what he called the failure by Canada and Mexico to curb the illegal flow of people and drugs across the border, however he has also repeatedly complained about U.S. trade deficits with both countries.
Meanwhile, Ottawa has said it is ready to respond with its own retaliatory tariffs, depending on what the U.S. decides to do.
The Bank of Canada, which cut its key interest rate by a quarter of a percentage point to three per cent, said Wednesday that U.S. trade policy is a major source of uncertainty and that a protracted trade conflict would likely weaken the Canadian economy and lead to higher prices.
TD Bank economist Marc Ercolao said the growth in the fourth quarter provides a decent handoff into 2025, given the looming uncertainties. However, he noted that future monetary policy setting is subject to higher-than-usual uncertainties.
“While we think the (Bank of Canada) will step to the sidelines at their March meeting, expedited rate cuts may be in the cards should a worst-case trade war ensue,” he said.
For November, Statistics Canada said goods-producing industries contracted 0.6 per cent, as mining, quarrying and oil and gas extraction fell 1.6 per cent.
The utilities sector dropped 3.6 per cent, as electric power generation, transmission, and distribution fell 4.4 per cent.
Services-producing industries edged lower by 0.1 per cent in November, weighed down by the transportation and warehousing sector which fell 1.3 per cent as it was hit by work stoppages including a strike by 55,000 postal workers.
Statistics Canada also pointed to labour disputes at the Port of Montreal and Port of Vancouver during the month.
The agency noted that several leisure-related industries including accommodation and food, arts, entertainment and recreation and air transportation grew in November as Taylor Swift’s Eras Tour arrived in Toronto.
The accommodation and food services sector increased 1.4 per cent in November, the largest rise since January 2023, while arts, entertainment and recreation grew 0.8 per cent. Air transportation added 1.3 per cent in November.
This report by The Canadian Press was first published Jan. 31, 2025.
