Canada’s Economy Contracts in Fourth Quarter of 2025 as Annual Growth Slows

Canada’s economy recorded a contraction in the final three months of 2025, defying earlier expectations of stable growth, according to new data released by Statistics Canada on Friday.

The federal agency reported that real gross domestic product declined at an annualized rate of 0.6 per cent in the October to December quarter. Economists had anticipated little to no change during that period. The slowdown was attributed in part to weaker residential investment and lower inventory rebuilding by manufacturers.

Statistics Canada said companies met demand by drawing down existing inventories instead of increasing production. Investment in housing construction, including apartments, condominiums and single family homes, fell by 4.4 per cent in the fourth quarter, weighing on overall economic output. The agency also estimates that economic activity remained largely flat in January, suggesting continued softness at the start of 2026.

For the full year 2025, Canada’s economy grew by 1.7 per cent. While still positive, that marks the slowest annual pace of growth since the economic contraction recorded during the COVID-19 pandemic in 2020. The data comes amid ongoing debates about housing affordability, interest rates and economic resilience, issues that remain central to federal and provincial policy discussions.

In contrast, India’s economy expanded more strongly during the same quarter. According to India’s Ministry of Statistics, the country’s GDP rose by 7.8 per cent in the December quarter, exceeding expectations and highlighting diverging global growth trends.