By Robb M. Stewart
OTTAWA--Canada's economic recovery stumbled in the final quarter of last year as good-producing industries struggled with supply-chain bottlenecks and the continued weight of tariffs and uncertainty.
Data from the national statistics agency on Friday showed gross domestic product flatlined in November, while its advance estimate indicated an only modest pickup the following month.
That points to a 0.5% contraction in the fourth quarter on an annualized basis, a second negative reading for 2025 and a partial reversal of the prior quarter's recovery.
Canada's economy has struggled to right itself after the blow of the Trump administration's abrupt shift to protectionism and the threats and imposition of tariffs. The Bank of Canada, which this week left interest rates steady a second time in a row, forecast no growth for the country in the latest quarter before recovering over the next two years.
GDP by industry was essentially unchanged between October and November at 2.327 trillion Canadian dollars, the equivalent of US$1.725 trillion, Statistics Canada said. That was slightly softer than the 0.1% growth economists had anticipated, following on the sharp 0.3% decline in October.
The agency's early estimate for December indicates GDP rose 0.1% on-month.
Official quarterly figures will be released in a month, and will include expenditure-based measures and volatile data such as inventories. On that basis, Canadian GDP expanded 2.6% annualized in the third quarter of last year following a 1.8% contraction the previous quarter.
The early look for December showed increases in manufacturing and wholesale trade, which were partially countered by declines in mining and oil and gas extraction.
Industry accounts for November showed activity by goods producers declined 0.3%, the third drop in four months, moderated slightly by a 0.1% advance for services-producing industries, thanks to expansions in retail trade, education services and transportation and warehousing.
Manufacturing in November fell 1.3% from the month before, dented by weakness in a sharp drop in output of motor vehicles and parts as a global semiconductor shortage held back auto production. Machinery and fabricated metal product manufacturing also fell for the month.
Overall, durable-goods activity retreated to levels last seen in mid-2011, excluding the early months of the Covid-19 pandemic in 2020. Non-durable goods activity also weakened, led by monthly contractions in food, and in plastics and rubber products manufacturing.
Crop production dropped with declines in wheat and other grains. And forestry and logging declined a third month running, with activity falling to a record low level as timber harvesting companies scaled back production in response to sawmill cutbacks following the latest U.S. levies on softwood.
Wholesale trade saw its biggest contraction in November since April, driven by declines in motor vehicle and parts activity, as well as in building materials and supplies.
The planned review this year of the existing trade pact between the U.S., Mexico and Canada means uncertainty is likely to remain heightened, and some economists warn the recent recovery in hiring could falter and joblessness in Canada could rise further.
Bank of Canada policymakers have said uncertainty around their projections is unusually high.
Bank Gov. Tiff Macklem on Wednesday said Canada's transition to a new trade environment could be smoother than expected, and business and household spending stronger. "Alternatively, the labor market could weaken further as trade impacts deepen, leading to lower household spending. Financial conditions could also tighten if volatility returns to markets," he said.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
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