The Canadian economy could struggle to meet the
Bank of Canada
‘s latest predictions for growth after
gross domestic product
(GDP) for November undershot estimates, say economists.
Economic growth was
flat in November
, slightly undershooting estimates for GDP to rise 0.1 per cent, but better than the 0.3 per cent contraction in October.
Statistics Canada estimates the economy expanded by 0.1 per cent in December, so the economy likely contracted by an annualized 0.5 per cent in the fourth quarter.
The Bank of Canada, in its latest Monetary Policy Report (MPR), which came out this week alongside its
interest rate decision
, called for fourth-quarter GDP to come in at zero per cent. For the first quarter of 2026, the MRP forecasted a GDP rebound of 1.8 per cent.
Here’s what economists think the latest GDP data means for the economy and the Bank of Canada.
‘Still struggling’: CIBC
“The Canadian economy was still struggling to eke out growth towards the end of the fourth quarter,” Andrew Grantham, an economist at CIBC Capital Markets, said in a note.
Even the turnaround in the retail sector was the result of the end of an industrial dispute in British Columbia that hit liquor sales, he said.
Grantham said the difference between Statistics Canada’s estimate for the fourth quarter and the Bank of Canada’s could be reconciled when full numbers for the period are published at the end of February.
“The still sluggish momentum towards quarter end may be a concern, as monthly growth rates will need to accelerate for the economy to achieve the Bank of Canada’s near two per cent MPR forecast for (the first quarter),” he said.
Tariffs
and trade uncertainty continue to hurt Canadian manufacturing and wholesaling sectors, he said, adding it’s apparent that the economy is also struggling for momentum in other areas.
“With underlying momentum still too weak to sustainably reduce slack within the Canadian economy, we continue to think that interest rates will need to be held in stimulative territory throughout this year and into the start of 2027,” Grantham said.
‘Bad news’: Capital Economics
“The monthly data for November is grimmer than it first appears,” Alexandra Brown, North America economist at Capital Economics Ltd., said in a note.
The manufacturing sector slumped 1.3 per cent on a 1.9 per cent contraction in the durable goods sector, following a 2.6 per cent drop in October. The sector was pulled down the most in November by month-over-month declines in transportation equipment manufacturing, machinery manufacturing and fabricated metal product manufacturing. Automotive manufacturing contracted 6.4 per cent.
“Statistics Canada attributed the weakness in manufacturing to supply chain bottlenecks, such as a global semiconductor shortage,” Brown said, adding that manufacturing activity fell to levels last seen in 2011, excluding the pandemic.
“The bad news didn’t end there,” she said, referring to Statistics Canada’s estimate for December.
Capital Economics is currently estimating that fourth-quarter annualized GDP will come in at minus 0.3 per cent, weaker than the Bank of Canada’s flat estimate for the quarter.
Looking ahead, “the flash estimate of only a weak monthly gain in December reduces the chance that quarterly growth will rebound sharply by 1.8 per cent annualized in the first quarter as the Bank of Canada expects,” Brown said.
‘Chilly note’: BMO
“Canadian real GDP ended 2025 on a distinctly chilly note,” Douglas Porter, chief economist at BMO Capital Markets, said in a note.
Several special factors were at play in November that tilted the GDP data, Porter said, including a slowdown in vehicle production due to a shortage of chips.
“We know that assemblies partially recovered in December,” he said.
On the plus side, an end to both the strike by Alberta’s teachers and the work stoppages by Canada Post employees boosted the services side of the economy.
Still, Porter predicts the economy contracted 0.3 per cent annualized in the final quarter of 2025 and expanded “a mere” 0.6 per cent year over year in 2025.
Excluding December, the economy stagnated for five consecutive months since July, he said.
Overall, the Canadian economy likely only grew 0.5 per cent over the past 12 months, making for a “sluggish handoff” to 2026.
Porter estimates the economy will likely post growth of one per cent this in 2026, close to the Bank of Canada’s estimate of 1.1 per cent.
“These results are not markedly different from the Bank of Canada’s views earlier this week, but the soft undertones will keep them ‘prepared to respond’ on interest rates,” he said.
• Email: gmvsuhanic@postmedia.com
'Bad news' GDP puts Bank of Canada's growth estimates in the crosshairs, economists say
2026-01-30 16:42:15
