Employers saw output fall across goods and services, manufacturing and construction declined, and work stoppages weighed on service industries, StatsCan says
Canadian employers heading into year-end planning are facing a softer economic backdrop after the country’s gross domestic product fell in October, led by declines in goods production and interruptions in parts of the service economy.
Statistics Canada (StatsCan) reported GDP contracted 0.3 per cent in October, a larger pullback than analysts expected, following 0.2 per cent growth in September.
The agency said the goods-producing sector dropped 0.7 per cent and services-producing industries fell 0.2 per cent.
Manufacturing and tariffs
Manufacturing output declined 1.5 per cent in October. StatsCan data showed machinery output fell 6.9 per cent.
Wood product manufacturing dropped 7.3 per cent — the steepest decrease since April 2020 — after additional U.S. tariffs took effect Oct. 14.
Other goods-producing industries were also weaker. The mining, quarrying, and oil and gas sector contracted 0.6 per cent, while construction fell 0.4 per cent.
StatsCan said residential building construction decreased for a third consecutive month, extending a trend that can affect hiring and scheduling decisions for employers tied to housing starts and related supply chains.
Work stoppages and service sector
On the services side, the data reflected disruptions tied to labour action. StatsCan said services-producing industries were affected by a nationwide Canada Post work stoppage and a teachers’ strike in Alberta.
The monthly decline in services came alongside the broader pullback in output, a combination employers often watch for signals on demand and staffing needs going into a new quarter.
StatsCan’s early estimate for November pointed to GDP rising 0.1 per cent, suggesting a modest rebound after October’s decline.
The October drop was the largest month-over-month decrease since December 2022, when GDP also fell 0.3 per cent.
Bank of Canada and interest rates
The GDP report comes as the Bank of Canada has signalled it expects muted growth late in the year. Governor Tiff Macklem said Dec. 10 he anticipated GDP growth would be weak in the fourth quarter, and the central bank held its key policy rate at 2.25 per cent that day.
Money markets are predicting the central bank’s next move will be a 25-basis-point hike, most likely in July 2026.
As reported by CBC, BMO senior economist Robert Kavcic described the October data as sluggish heading into the final quarter, writing, “All told, this is pretty soft momentum to start off Q4."
He added that with November’s initial estimate showing only modest growth, “the Canadian economy has some work cut out to avoid another negative print for the final quarter of the year.”
“That will close out a very choppy year for Canadian growth in still-choppy fashion,” Kavcic wrote.
After the GDP figures were released, the Canadian dollar edged up to $1.3696 to the U.S. dollar, or 73.01 U.S. cents, compared with C$1.3703, or 72.98 U.S. cents.
