Market News

OTTAWA — A beleaguered manufacturing sector was weighing on the economy heading into the end of 2025, Statistics Canada said Friday.

Real GDP growth was flat in November, rebounding somewhat from a decline of 0.3 per cent in October, the agency said.

StatCan said drops in activity in goods-producing industries were offset by expansion on the services side of the economy.

Manufacturing faced a 1.3 per cent decline in November. StatCan said the output of motor vehicles and parts hit a bottleneck as a global shortage of semiconductors curtailed production at a major auto plant.

TD economist Marc Ercolao said the manufacturing industry is tracking for a 2.5 per cent decline in 2025, which would mark the worst year for the sector in nearly 20 years, outside the COVID-19 pandemic and the global financial crisis.

Ercolao said U.S. tariffs on autos, lumber and various metals weighed on manufacturing activity last year.

"We look for that to partially recover into next year, but overall manufacturing is one of those sectors that is disproportionately dragging GDP down," he said.

Activity in the wholesale trade sector fell 2.1 per cent in November thanks to the declines in automotive output. The agriculture, forestry, fishing and hunting industries also contracted in the month.

Retail trade expanded 1.3 per cent in November, StatCan said, more than offsetting two previous months of declines.

Various sectors also saw rebounds in November thanks to the end of strikes at Canada Post, Alberta schools and British Columbia liquor stores.

StatCan’s flash estimates suggest real GDP increased 0.1 per cent in December as the manufacturing and wholesale trade sectors returned to growth.

If that early look at the data lines up with next month’s quarterly GDP report, StatCan said the economy would have contracted 0.5 per cent on an annualized basis in the final quarter of 2025.

A contraction in the economy to end 2025 would mark a sharp swing lower from annualized growth of 2.6 per cent in the third quarter. The economy also shrank in the second quarter of 2025 as U.S. tariffs took hold.

Ercolao said TD is still expecting GDP growth to come in flat for the fourth quarter of the year, roughly in line with the Bank of Canada's updated forecasts from earlier this week.

The monthly GDP by industry figures don't always capture sharp swings in trade volumes, he noted, but the quarterly GDP by expenditure report does.

With signs net exports were trending positive toward the end of 2025, Ercolao said he expects that will be enough of a tailwind to raise the economy out of negative territory to end the year.