Economy at ‘stall-speed’ at end of 2025
New data shows tariffs and related trade uncertainty are still weighing on the Canadian economy, with monthly GDP growth falling short of expectations and preliminary readings for the fourth-quarter suggesting a contraction.
“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,” says Andrew Grantham, CIBC Executive Director and Senior Economist.
The economy stalled in November, versus a consensus estimate of 0.1% growth, Statistics Canada said Friday. The agency’s advance estimates suggest GDP was on track to shrink by an annualized 0.5% for the fourth quarter — below the Bank of Canada’s recent projection.
“The Canadian economy was still struggling to eke out growth towards the end of the fourth quarter, even as some of the temporary factors that drove a contraction in October faded or reversed,” Grantham said.
The central bank held its policy interest rate steady at 2.25% at its last two meetings in January and December. Its next meeting is on March 18.
Durable goods production at 15-year low
As U.S. tariffs continued to undercut manufacturing, goods-producing industries declined 0.3% in November, down for the third time in four months, StatsCan said. Agriculture, forestry, fishing and hunting sectors also declined last month.
The drop in durable-goods manufacturing was the worst since mid-2011, excluding the first half of 2020 when the COVID-19 pandemic began.
But services-producing industries edged up 0.1%, with expansions in the retail trade, educational services and transportation and warehousing sectors. Overall, 10 of the 20 industrial sectors grew in November.
For 2025 as a whole, the economy grew by 1.3%, the agency said.
TD Bank economist Marc Ercolao described the data as Canada’s economy cruising “into year-end at stall speed.”
“We don't think today's data moves [Bank of Canada policymakers] off of their current policy stance even as they acknowledge that considerable uncertainty around trade and overall economic growth is still present,” he said. “All told, we maintain our view that the BoC has reached the end of their interest rate easing cycle.”
