By Robb M. Stewart


OTTAWA--A slump by Canada's auto industry in November as a semiconductor shortage weighed on activity hit sales by factories and wholesalers and threatens to hold back economic growth in the final quarter of last year.

Manufacturing shipments declined 1.2% from the month before to a seasonally adjusted 70.77 billion Canadian dollars, the equivalent of about US$50.97 billion, Statistics Canada said Thursday. That represented the steepest pullback since May, and was a touch more than the data agency's advance estimate for a monthly drop of 1.1% following a 1.0% drop in sales in October.

The same month, wholesale trade retreated 1.8% to C$84.45 billion the second steepest decline in the last two years and much weaker than the earlier estimate for a modest 0.1% rise for November.

Sales of motor vehicles and parts and by auto-industry wholesalers drove the declines. The statistics agency noted a major auto assembly plant in Canada was significantly dented by global semiconductor shortages, a supply chain disruption that also affected several auto parts manufacturing plants.

In volume terms, factory sales were down 2.3% during November and fell 4.8% on the same month a year earlier, while sales by wholesalers in the country dropped 2.3% for the month and 1.6% year-over-year.

The slump in volumes doesn't bode well for the economy, which Statistics Canada had forecast grew a modest 0.1% in November from a month prior.

Alexandra Brown, a North America economist at research firm Capital Economics, said the agency didn't account for the weakness in wholesale activity in its projection. That raises the risk industry-level gross domestic product was unchanged for the month rather than up slightly.

"That would be a concerning result following the 0.3% fall in October and would put the economy on track for negative growth last quarter," Brown said.

Retail sales are expected to mitigate some of the weakness for the month, and Statistics Canada last month estimated trade was up 1.2% in November, the strongest advance since June to roll back most of the decline the previous two months.

Trade exposed sectors such as manufacturing in the country have been hit hard by a fall in demand in the U.S. in the wake of the Trump administration's tariffs. With the North American free trade pact up for review this year, uncertainty is expected to remain high in the coming months, particularly after the president this week described the U.S.-Mexico-Canada agreement he signed in 2020 as "irrelevant."

S&P Global's Canadian purchasing managers index indicated manufacturing has been in contraction 11 months running, with little change for the industry in the final month of 2025 following slightly steeper pullbacks in output and new orders in November.

Statistics Canada's latest manufacturing survey found sales of motor vehicles sank 15.9% to C$3.38 billion in November, a second straight monthly decline and the lowest level since October 2022. In addition to semiconductor shortages, economists said the addition of U.S. tariffs on imports of trucks and buses may also have affected sales.

Stripping out trade in vehicles, parts and accessories, factory sales in November nudged up 0.1% and were 0.3% higher than a year earlier.

Machinery sales also faltered in the latest month, though petroleum sales were up strongly, in part after a maintenance shutdown at a major refinery ended and prices for refined products rose.

The sharp drop in wholesale trade followed increased sales in September and October.

Motor vehicle and parts sales dropped 11.5% for November to C$12.9 billion, the lowest since October 2022. Excluding the auto sector, wholesale sales edged up 0.1% for the month.

Factory inventories ticked up 0.1% during November, as did unfilled orders for the manufacturing industry. Wholesale inventories increased 0.6% for the month.

The Bank of Canada has projected weak economic growth in the final quarter of 2025 and a modest 1.1% annualized expansion in 2026. After aggressively cutting interest rates through October, the central bank has since held steady and signalled its policy rate is likely at about the right level to keep inflation near its 2% target while also offering support for the economy.


Write to Robb M. Stewart at robb.stewart@wsj.com


(END) Dow Jones Newswires

01-15-26 1130ET