The near-term outlook remains fragile amid trade policy uncertainty, with potential rebounds in lagging sectors in November despite October contractions.

Canada’s central bank is expected to keep the policy rate at 2.25% for now, with forecasts suggesting stability even as Q4 shows a weaker pace and a 0.5% annualized contraction signals more slack in the economy.

Experts view October data as broadly expected, attributing softness to temporary factors and tariff-related strains rather than a enduring downturn.

Canada’s economy contracted in October, led by a 1.5% drop in goods-producing sectors and a drop in services driven in part by disruptions like a province-wide teachers’ strike.

There were signs of near-term recovery, with GDP for November tentatively seen rising slightly, suggesting a potential rebound ahead.

Construction contracted for the first time in four months, with residential and other construction activities softening.

The October drag is seen as tariff-impacted, with a gradual recovery expected; the longer-term growth outlook remains subdued before a gradual improvement.

Analysts anticipate subdued growth into 2026 with a gradual recovery thereafter, with October softness not signaling a broader deterioration.

Markets had been pricing in a possible 25 basis point hike for July 2026, but softer October data could push the timing of policy moves back, even as the Bank signals resilience to tariffs.

The November rebound remains modest, and observers warn that avoiding another negative print in Q4 will require continued resilience, despite a relatively strong labour market.

October’s performance dampened momentum for the year, while early November indicators point to a partial rebound across several industries.

On an annual basis, real output was up about 0.4% from a year earlier, the slowest pace since the pandemic.