Canada’s real GDP fell by 0.3% in October 2025, reversing the 0.2% growth recorded in September. This broad contraction affected more than half of the industrial sectors, with 11 out of 20 experiencing declines. Both goods-producing industries and services-producing industries shrank during the month, by 0.7% and 0.2% respectively.

The manufacturing sector took a significant hit, dropping 1.5% and erasing gains made in the previous month. Durable goods manufacturing declined 2.3%, largely dragged down by machinery and wood product production. Wood product manufacturing fell 7.3%, marking its largest drop since 2020. This sharp decline was triggered by the introduction of new US tariffs on Canadian lumber, effective from 14 October.

Mining and energy also contracted by 0.6%, with oil and gas production down 1.2%, primarily due to facility maintenance that reduced crude bitumen extraction. However, potash mining rebounded by 4.5% following a shutdown in September, slightly easing the overall sector decline.

Labour disruptions impacted key public sectors in October. Education fell 1.8% as a province-wide teachers’ strike in Alberta, lasting from 6 to 29 October, caused the largest subsector drop since late 2023. Postal services plummeted 32.1% amid nationwide strike actions by Canada Post workers, who shifted to rotating strikes starting 11 October. Retail trade also declined 0.6%, partly affected by a liquor store strike in British Columbia, which disrupted beer, wine, and liquor sales.

In trade and construction, wholesale trade fell 0.9%, driven down by miscellaneous merchant and machinery wholesalers. Construction decreased by 0.4%—its first fall in six months. Residential construction dropped for the third consecutive month due to a slowdown in new single-occupancy home building. Non-residential construction recorded modest growth of 0.1%, the only positive note in the sector.

On the positive side, the finance and insurance sector continued its streak of growth, rising 0.4%—its fifth consecutive monthly increase. This growth was supported by increased activity in both equity and debt markets.

Looking ahead, early estimates for November 2025 point to a slight recovery with a forecasted 0.1% increase in real GDP. Expected growth in education (post-strike recovery), construction, and transportation could offset ongoing weakness in mining and manufacturing.

For forex traders, October represented a challenging month for the Canadian economy. The 0.3% GDP contraction was driven by a “perfect storm” of labour unrest and new trade barriers, notably the US lumber tariffs. Key sectors including manufacturing, education, postal services, and retail trade were hit hard by strikes and operational disruptions. Meanwhile, finance sector resilience and early signs of moderate growth in November offer some optimism but suggest caution.

This data underscores a cautious approach for the Bank of Canada, which must balance temporary domestic challenges against growing geopolitical trade risks. Forex traders should monitor upcoming data releases closely for confirmation of the tentative recovery and any signs of policy shifts.

Original Source: Greg Michalowski of investinglive.com