‘Bad news’ GDP puts Bank of Canada’s growth estimates in the crosshairs, economists say

The Bank of Canada building in Ottawa. Photo by David Kawai/Bloomberg files

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The Canadian economy could struggle to meet the Bank of Canada‘s latest predictions for growth after gross domestic product (GDP) for November undershot estimates, say economists.

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Economic growth was flat in November, slightly undershooting estimates for GDP to rise 0.1 per cent, but better than the 0.3 per cent contraction in October.

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Statistics Canada estimates the economy expanded by 0.1 per cent in December, so the economy likely contracted by an annualized 0.5 per cent in the fourth quarter.

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The Bank of Canada, in its latest Monetary Policy Report (MPR), which came out this week alongside its interest rate decision, called for fourth-quarter GDP to come in at zero per cent. For the first quarter of 2026, the MRP forecasted a GDP rebound of 1.8 per cent.

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Here’s what economists think the latest GDP data means for the economy and the Bank of Canada.

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‘Still struggling’: CIBC

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“The Canadian economy was still struggling to eke out growth towards the end of the fourth quarter,” Andrew Grantham, an economist at CIBC Capital Markets, said in a note.

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Even the turnaround in the retail sector was the result of the end of an industrial dispute in British Columbia that hit liquor sales, he said.

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Grantham said the difference between Statistics Canada’s estimate for the fourth quarter and the Bank of Canada’s could be reconciled when full numbers for the period are published at the end of February.

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“The still sluggish momentum towards quarter end may be a concern, as monthly growth rates will need to accelerate for the economy to achieve the Bank of Canada’s near two per cent MPR forecast for (the first quarter),” he said.

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Tariffs and trade uncertainty continue to hurt Canadian manufacturing and wholesaling sectors, he said, adding it’s apparent that the economy is also struggling for momentum in other areas.

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“With underlying momentum still too weak to sustainably reduce slack within the Canadian economy, we continue to think that interest rates will need to be held in stimulative territory throughout this year and into the start of 2027,” Grantham said.

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‘Bad news’: Capital Economics

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“The monthly data for November is grimmer than it first appears,” Alexandra Brown, North America economist at Capital Economics Ltd., said in a note.

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The manufacturing sector slumped 1.3 per cent on a 1.9 per cent contraction in the durable goods sector, following a 2.6 per cent drop in October. The sector was pulled down the most in November by month-over-month declines in transportation equipment manufacturing, machinery manufacturing and fabricated metal product manufacturing. Automotive manufacturing contracted 6.4 per cent.

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“Statistics Canada attributed the weakness in manufacturing to supply chain bottlenecks, such as a global semiconductor shortage,” Brown said, adding that manufacturing activity fell to levels last seen in 2011, excluding the pandemic.