OTTAWA, Dec 23 (Reuters) - The Canadian economy shrank by a greater-than-expected 0.3% in October, the largest drop in almost three years, on weakness in both the goods and services sectors, official data showed on Tuesday.
Analysts had forecast growth would dip by 0.2% from September as the economy continues to adjust to U.S. trade measures. Statscan said initial data indicated that GDP would grow by 0.1% in November.
The month-on-month fall was the largest since the 0.3% decline seen in December 2022. The goods sector fell 0.7% in October while services contracted by 0.2%.
The figures are unlikely to overly concern the Bank of Canada. Governor Tiff Macklem said on December 10 that he expected GDP growth to be weak in the fourth quarter.
The manufacturing sector dropped by 1.5%, partly reflecting a 6.9% plunge in machinery output. Wood product manufacturing dropped by 7.3%, the largest decline since April 2020, following additional U.S. tariffs that came into force on October 14.
Services-producing industries were hit by a nationwide work stoppage by Canada Post workers and a teachers' strike in the province of Alberta.
The Bank of Canada held its key policy rate steady at 2.25% on December 10. Macklem, noting the economy was proving resilient overall to U.S. tariffs, said the rate was at the right level to keep inflation close to the bank's 2% target.
Before the GDP data were released, money markets were predicting that the Bank's next move would be a 25 basis point hike, most likely in July 2026.
Reporting by David Ljunggren, editing by Dale Smith
