Canada Q4 2025 GDP Analysis: Modest November Growth Follows October Contraction

This analysis is based on the Wall Street Journal (WSJ) report [1] dated 2025-12-23, which details Canada’s stumbling economic activity in the final quarter of 2025. The October GDP contraction of 0.3%—the largest in nearly three years—was driven by a 1.5% decline in manufacturing, oil and gas sector slowdowns, and the impacts of Canada Post and Alberta teachers’ strikes [3,4]. November’s advance estimate shows a modest 0.1% growth, supported by gains in education, construction, and transportation, though offset by ongoing weakness in mining and manufacturing [4].

TD economist Ercolao predicts Q4 GDP will be roughly flat, while Grantham forecasts a 0.5% annualized contraction [2]. The Bank of Canada held its key rate steady at 2.25% following the October data, and the weak Q4 performance could delay any potential rate hikes in 2026 [3]. Concurrently, retail sales rebounded 1.2% in November, but this was tempered by rising unemployment and shrinking wage growth, suggesting ongoing household financial pressure [1].

1. The October contraction was amplified by temporary factors (strikes, oil/gas maintenance), yet November’s modest recovery indicates underlying economic fragility rather than a strong rebound.
2. The weak Q4 performance creates a high bar for the Bank of Canada to justify rate hikes in 2026, aligning with analyst expectations of sustained low rates [2,3].
3. The dichotomy between recovering retail sales and contracting wage growth highlights potential household strain in 2026, as consumers may face reduced purchasing power despite temporary spending increases [1].

• The preliminary nature of November’s 0.1% growth estimate (final data due January 30, 2026 [4]) means Q4 could contract more than projected, increasing recessionary risks.
• Ongoing weakness in manufacturing and energy sectors could spill over to related industries, prolonging economic slowdown.

• The Bank of Canada’s steady rate policy may support household and business borrowing costs, mitigating some economic pressures.
• Resolution of temporary strike disruptions and completion of oil/gas maintenance could support sectoral recovery in early 2026.

• October 2025
  : 0.3% GDP contraction (largest in ~3 years) [3,4]
• November 2025
  : 0.1% advance GDP growth estimate [2,4]
• Q4 2025 Projected
  : Roughly flat to 0.5% annualized contraction [2]
• Bank of Canada Rate
  : Steady at 2.25% [3]
• Household Indicators
  : 1.2% November retail sales rebound; rising unemployment; shrinking wage growth [1]