The

Canadian economy

contracted by 0.3 per cent in October, thanks to a significant decline in manufacturing activity and labour strikes that weighed on growth in several sectors.

A preliminary estimate for November has

gross domestic product

rebounding by 0.1 per cent, with increases in transportation and warehousing, education and construction partially offset by declines in manufacturing and mining, quarrying and oil and gas extraction.

In October, goods-producing industries were down 0.7 per cent and services-producing industries contracted by 0.2 per cent, according to monthly data released Tuesday by Statistics Canada. October’s decline offset 0.2 per cent growth recorded in September. Overall, 11 out of 20 industrial sectors contracted during the month.

Bank of Montreal senior economist Robert Kavcic said real output is up 0.4 per cent from a year ago, the “slowest clip” since the pandemic.

“All told, this is pretty soft momentum to start off Q4,” he said, in a note. “The October result was a ‘low’ -0.3 per cent, and the subdued November rebound suggests that the Canadian economy has some work cut out to avoid another negative print for the final quarter of the year.”

Trade-impacted sectors such manufacturing decreased by 1.5 per cent, with wood product manufacturing down 7.5 per cent, the largest drop since the outset of the pandemic in April 2020. This contraction reflected a slowdown at sawmills, following an announcement of additional U.S. tariffs on Canadian wood products on Oct. 14.

The mining, quarrying, and oil and gas sector fell by 0.6 per cent overall in October, due to several oil and gas operators performing maintenance.

Activity in the construction sector fell for the first time in four months, contracting by 0.4 per cent. Residential building construction was down in October, as were engineering and other construction activities.

Strikes also disrupted a number of sectors during the month. The Alberta teacher’s strike contributed to educational services contracting by 1.8 per cent. The Canada Post rolling strike was also the main driver behind a contraction of 1.1 per cent in transportation and warehousing while a strike by the BC General Employees Union led to lower activity for beer, wine and liquor retailers, contributing to an overall 0.6 per cent contraction in the retail sector.

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Partially offsetting the declines was growth in the finance and insurance sector, which rose by 0.4 per cent in October.

During its last rate decision of the year this month, the Bank of Canada held its policy rate at 2.25 per cent, citing a more resilient economy and contained inflationary pressures. Bank of Canada governor Tiff Macklem said the overnight rate was at about the right level to support the Canadian economy. The bank released its forecast in October, which predicted one per cent growth in the fourth quarter.

Canada’s GDP in the third quarter beat expectations, with the economy growing by 2.6 per cent, above the central bank’s forecast of 0.5 per cent.

Toronto-Dominion Bank economist Marco Ercolao said Tuesday’s data changes nothing on the monetary policy front, with TD still expecting the Bank of Canada to be done with its easing cycle.

“The Bank of Canada (BoC) doesn’t make its next policy decision until Jan. 28th, and we don’t think today’s data moves them off of their current policy stance,” he said, in a note to clients.

“The BoC has acknowledged that trade-related impacts on inflation and economic growth are becoming more clear, though that doesn’t lower the level of uncertainty in coming quarters as Canada and the U.S. continue to work on hammering out a trade deal.”

• Email: jgowling@postmedia.com