The Canadian economy faced stagnation in November 2025, with the gross domestic product (GDP) remaining unchanged at zero per cent after a 0.3 per cent decline in October, according to recent data from Statistics Canada. While service sectors demonstrated some resilience, gains were unable to fully counteract a significant downturn in goods production, particularly in manufacturing.
Manufacturing Sector Experiences Decline
Statistics Canada reported a concerning 1.3 per cent drop in the overall manufacturing sector, with durable goods experiencing a sharp 1.9 per cent decrease. This downturn affected various industries, including transportation equipment, machinery, fabricated metal products, and motor vehicles. The agency highlighted that the performance of the durable goods sector had sunk to levels not seen since mid-2011, with the exception of the initial months of the COVID-19 pandemic in 2020.
The impact of U.S. tariff policies, particularly those implemented by former President Donald Trump, has been increasingly felt in Canada’s manufacturing landscape. Canadian exports of steel, aluminium, lumber, and automotive products have faced steep tariffs, creating challenges for businesses reliant on these sectors. Furthermore, Trump has warned of potential additional tariffs on Canada’s aviation manufacturing should specific certification requirements for U.S. aircraft not be met.
Service Sectors Provide Some Relief
Despite the struggles within manufacturing, various service sectors demonstrated growth, helping to cushion the overall economic impact. The retail trade sector expanded by 1.3 per cent in November, rebounding after consecutive declines in the preceding months. Notably, food and beverage retailers saw a remarkable 2.5 per cent increase, primarily attributed to a surge in sales of alcoholic beverages following labour disruptions in British Columbia.
Educational services also contributed positively, rising by one per cent, particularly within elementary and secondary schools. This growth was largely due to the resumption of classes in Alberta after the conclusion of a teachers’ strike on October 29.
Economic Outlook and Implications
The broader economic landscape paints a mixed picture. Derek Holt, head of capital markets economics at the Bank of Nova Scotia, characterised the economy as “limping into year-end.” He noted that various factors—including macroeconomic drivers, weather conditions, and strikes—contributed to the stagnant growth. Meanwhile, Andrew DiCapua, principal economist for the Canadian Chamber of Commerce, expressed concerns over the ongoing trade war, suggesting that the manufacturing sector’s weakness is likely to continue into the new year.
In light of these developments, the Bank of Canada maintained its key policy interest rate at 2.25 per cent, indicating a cautious approach to monetary policy amid the prevailing uncertainty. Governor Tiff Macklem noted that while current growth appears modest, there are expectations for improvement as 2026 approaches.
Why it Matters
The current state of Canada’s economy underscores the interconnectedness of global trade and domestic production. As manufacturing struggles under the weight of trade disputes and tariff threats, the overall economic momentum is jeopardised. This stagnation not only affects businesses but also has broader implications for employment and consumer confidence going into 2026. Without a robust recovery in manufacturing, the Canadian economy may face prolonged challenges, necessitating a reevaluation of trade strategies and economic policies to ensure sustainable growth.
