October’s GDP dip raised eyebrows but economists still see a shallow slowdown
Canada’s economy appeared to hit a soft patch in October, but Royal Bank of Canada economists argued it still tracked toward a mild year‑end expansion.
RBC’s Claire Fan and Abbey Xu, in an analysis ahead of Statistics Canada’s October GDP release, projected a 0.2% monthly decline, slightly weaker than the agency’s initial 0.3% flash estimate for a contraction.
“If October’s decline is realized, it would represent the steepest monthly drop in GDP since February,” they wrote.
Goods sectors weakened as services held the line
Fan and Xu said the drag in October largely came from the goods side of the economy, with services essentially flat.
“In October, we see weakness mostly from goods-producing sectors, while output among service industries remained essentially unchanged,” the report said.
“Non-conventional oil production in Alberta contracted sharply (-5%) in October after four consecutive months of expansion,” they wrote, adding that manufacturing output also declined, partly reversing September’s gains.
StatsCan’s mineral data, they noted, pointed to a “modest recovery in mining output” that helped cushion those hits.
On the services side, the economists said home resales rose 0.8% month over month, bolstering real estate activity even as wholesale and retail volumes slipped by 0.7% and 0.6% respectively.
Education services were temporarily weighed down by an Alberta teachers’ strike, while arts and entertainment benefited from the Toronto Blue Jays’ playoff run – a gain likely reversed in November.
Early November data hinted at a rebound
The soft October print did not, on its own, shift RBC’s broader outlook. Early November readings on the labour market and consumer activity pointed to stabilization rather than a slide into recession.
“Hours worked increased a larger 0.4%, and our tracking of RBC consumer spending data indicates continued strength, especially in discretionary purchases as the holiday shopping season ramps up,” Fan and Xu wrote.
They highlighted Statistics Canada’s advance indicator showing retail sales rebounding by 1.2% in November and maintained a forecast for a “soft 0.5% annualized increase in GDP for Q4.” That figure remained a projection rather than realized data and would have been subject to revision.
What it meant for rates and mortgage borrowers
For mortgage professionals, the key question remains how much weakness policymakers would tolerate before adjusting course.
In a separate outlook, Fan said “sticky underlying inflation due to resilient domestic demand” has made it difficult for the Bank of Canada to justify moving its overnight rate back into “outright stimulative levels,” even as growth slowed.
RBC’s GDP work through 2025 consistently framed the slowdown as a “gradual cooling in labour markets” rather than the start of a deep downturn, with growth “slowing under the surface but not contracting.”
That soft‑landing narrative suggests a prolonged period of restrictive borrowing costs, a still‑resilient consumer and a mortgage market that remains challenging, but not collapsing.
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