December 23, 2025
RED FM News Desk
New government data released Tuesday reveals that the Canadian economy contracted by 0.3% in October, a sharper decline than economists had anticipated. This represents the most significant monthly drop in Gross Domestic Product (GDP) since December 2022, driven by widespread weakness across both the goods and services sectors.
The goods-producing sector was particularly hard hit, falling by 0.7%, while the services sector saw a 0.2% decrease. Within the industrial landscape, overall manufacturing output dropped by 1.5%, highlighted by a sharp 6.9% plunge in machinery production. Furthermore, wood product manufacturing crashed by 7.3%, marking its steepest decline since April 2020. This specific slump followed the implementation of additional U.S. tariffs on October 14, as the economy continues to struggle with shifting American trade policies.
Labor unrest also played a significant role in the month’s poor performance. The services sector faced substantial headwinds due to a nationwide strike by Canada Post employees, alongside a regional teachers’ strike in the province of Alberta. Despite these disruptions, preliminary data from Statistics Canada offers a slight glimmer of hope, with early estimates suggesting a modest 0.1% recovery in GDP for the month of November.
The Bank of Canada appears to be maintaining a cautious but steady outlook in light of these figures. Governor Tiff Macklem previously stated on December 10 that the bank had already expected GDP growth to remain weak through the fourth quarter. On that same day, the central bank opted to hold its key policy rate steady at 2.25%. Macklem noted that while the economy is currently navigating challenges posed by U.S. tariffs, it remains resilient, and the bank is confident that the current rate is sufficient to keep inflation anchored near the 2% target.
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