The Canadian economy contracted by 0.2 per cent in November, the largest monthly decline in a year, Statistics Canada said on Friday.

Despite the weak November figures, an early flash estimate for December gross domestic product indicated the economy expanded by 0.2 per cent in the final month of 2024, putting it on track for an annualized increase of 1.8 per cent in the fourth quarter, in line with the Bank of Canada’s forecast. That would mark an increase over third quarter growth of 1.1 per cent.

“It’s steady as she goes for domestic growth developments, as recent data comes in more or less in line with expectations,” said Toronto-Dominion Bank economist Marc Ercolao, in a note.

Canadian Imperial Bank of Commerce senior economist Andrew Grantham said he thinks November’s contraction does not set up Canada’s economy well for a shock from U.S. tariffs, should they eventually be implemented.

“Overall, the economy appears to be in reasonable, albeit not great health and clearly risks to the future outlook have intensified due to the tariff threats,” he said, in a note to clients. “The lack of economic momentum toward the end of last year, and the negative impact of potential tariffs on the future outlook, both lean towards further interest rate cuts from the Bank of Canada.”

Bank of Montreal economist Benjamin Reitzes added that this GDP reading has little bearing on policymakers at Canada’s central bank, who will remain focused on trade developments.

“This is all old news, though, as everyone is on Tariff Watch at the moment,” Reitzes said in a note. “That’s all that matters near-term, whether we like it or not.”

The slowdown in November was driven largely by declines in the transportation and warehousing sector, in which output decreased by 1.3 per cent. The contraction was due to work stoppages at the Port of Vancouver and the Port of Montreal, in addition to the Canada Post strike, which caused activity in the postal sub-sector to shrink by 20.3 per cent. More than 55,000 postal workers walked off the job on Nov. 15, ahead of the holiday shopping season.

Goods-producing industries also experienced a decline in activity, contracting by 0.6 per cent, with mining, quarrying and oil extraction falling by 1.6 per cent.

Interest rate sensitive areas of the economy experienced some positive growth. Real estate, rental and leasing grew by 0.3 per cent during the month, the seventh consecutive monthly increase. This was driven by increased housing activity in Ontario, Quebec and British Columbia.

The construction sector also increased by 0.7 per cent in November, driven by higher activity in residential and non-residential construction. Residential building construction increased by 1.8 per cent, the fourth consecutive monthly increase.

Leisure-related sectors also saw growth in November. Statistics Canada said the boost coincided with the arrival of Taylor Swift’s Eras Tour to Toronto. The accommodation and food sector grew by 1.4 per cent during the month, the largest increase since January 2023, while arts, recreation and entertainment increased by 0.8 per cent.

• Email: jgowling@postmedia.com

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