
Economic Growth Declines in November
- Real gross domestic product decreased 0.2 per cent in November, the largest monthly contraction since December 2023. Overall, there were broad based declines as 13 of 20 sectors contracted in November. A preliminary estimate of 0.2 per cent growth in December means Statistics Canada estimates the economy grew by 0.4 per cent in the fourth quarter and 1.4 per cent for 2024 as a whole.
- The goods-producing industries contracted 0.6 per cent in November. Mining, quarrying and oil and gas extraction led the decline after a strong October. The sector fell 1.6 per cent in the month as all three subsectors contracted. The oil and gas extraction subsector decreased 1.5 per cent in November as oil sands extraction fell by 3.4 per cent, being the main contributor to the sector’s overall decline.
- The transportation and warehousing sector declined 1.3 per cent in November, the largest monthly decline since December 2022. However, the sector was impacted by work stoppages. For example, the postal service subsector contracted by about 20 per cent contracted in November, as around 55,000 postal services workers went on strike on November 15. Work stoppages also impacted activity in the rail and water transportation subsectors in the month, both contracting in the month.
- The arrival of Taylor Swift’s Eras Tour to Toronto likely gave a boost to the leisure industries in Canada. Multiple leisure related industries such as accommodation and food, arts, entertainment and recreation and air transportation expanded in November. The accommodation and food services sector increased 1.4 per cent in November, the largest increase since January 2023, rising for a third consecutive month. In addition, air transportation increased for the second consecutive month, in November, as both domestic traffic and flights from the U.S. contributed to the rise.
- Sectors related to the housing market are finishing the year stronger. Real estate and rental and leasing increased 0.3 per cent in November, up for the seventh month in a row. Activity at the offices of real estate agents and brokers and activities related to real estate was the main contributor to growth. The construction sector rose in the month as well, by 0.7 per cent, driven by higher activity in both residential and non-residential building construction.
Insights
Today’s release of GDP estimates shows an economy that continues to ease in the second half of 2024, with a decline of 0.2 per cent in November, and likely finish with a meagre 1.6 per cent (annualized) for the fourth quarter. However, as Canada enters 2025, several forces are pulling the economy in different directions, creating significant uncertainty about what lies ahead. Inflation is hovering around 2 per cent, but price growth among services has remained stronger than expected. The labour market had cooled in 2024 but showed resilience to round out the year with employment growing in three of the last four months. These reasons are clouding the Bank of Canada’s decision on rate cuts. However, conditions were favourable enough for the Bank to reduce rates this week, albeit by a smaller margin than the previous two rate reductions.
Consumer and business confidence has been weak in Canada in recent months. With interest rates still above their neutral rate, and an increase to the unemployment rate through much of 2024, consumers and businesses are understandably pessimistic on the overall state of the economy. Additionally, a slowdown in population growth will occur, as federal reductions on immigration take effect. But the most important dynamic is occurring south of the border. The new U.S. administration is planning to impose 25 per cent tariffs on all goods imported from Canada beginning tomorrow, February 1, with the only potential exception being crude oil. The tariffs would devastate many Canadian industries—particularly manufacturing—weaken the Canadian dollar, come with retaliatory tariffs from the federal government, re-igniting inflation and severely hurting economic growth.
At the same time, these impending tariffs are also putting pressure on the U.S. Federal Reserve. Facing issues of stubbornly high inflation, potential new tariffs, and tightened immigration rules, the Fed is being pressured to keep rates higher longer. At the same time, the potential for tax cuts and deregulation could help spur investment in the U.S. which could help offset price pressures as regulatory costs go down. The main concern however is the uncertainty and timing of policy changes making it difficult to predict future price trends. This fog of uncertainty is unlikely to completely go away anytime soon.

To learn more about Canada’s economic outlooks for the long-term or the next five year’s, please visit our Canadian Three-Year Outlook.
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