Canadian economy shrank to end 2025 after sharp inventory decline

Statistics Canada reported that real GDP fell an annualized 0.6% in Q4 2025, driven largely by a steep decline in business inventories, and provided a preliminary estimate that GDP was unchanged in January after a 0.2% rise in December.

The Canadian economy ended 2025 on a softer note as output pulled back late in the year. Statistics Canada reported an annualized drop of 0.6 per cent in real gross domestic product for the fourth quarter. That decline was driven mainly by a sharp fall in business inventories while household spending, exports and government capital spending provided partial offsets. A preliminary estimate from Statistics Canada showed real GDP was unchanged in January after a 0.2 per cent increase in December. Key points: - Real GDP fell an annualized 0.6% in Q4 2025, with a sharp decline in business inventories cited as the main drag. - Higher household spending, exports and government capital investment partially offset the inventory drop. - Statistics Canada’s preliminary estimate indicates real GDP was unchanged in January after a 0.2% gain in December. - The report also references diplomatic and trade developments reported in the same briefing, including an article claim that Prime Minister Mark Carney has landed in India and an announcement that China will begin halting tariffs on Canadian canola starting next week. Summary: The Q4 pullback reflects notable inventory adjustments even as other demand components supported activity. Undetermined at this time.