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Canada's Manufacturing Sales Plunge, Recession Fears Grow

  //business-finance.news-articles.net/content/202 .. facturing-sales-plunge-recession-fears-grow.html
  Published in Business and Finance on Thursday, January 15th 2026 at 10:29 GMT by The Globe and Mail
      Locales: Ontario, CANADA

Toronto, ON - January 15th, 2026 - A concerning trend is emerging within the Canadian economy, as the manufacturing sector continues to struggle. Statistics Canada released data today indicating a third consecutive monthly decline in sales for November, raising significant concerns about a potential recession. Sales dipped 0.7% to $74.3 billion, a continuation of the downward trajectory observed in October (down 0.5%) and September (down 0.4%). This performance fell short of economists' predictions, which had anticipated a slight increase.

The decline isn't isolated to a single area; it's broad-based across critical manufacturing sectors. Machinery, motor vehicles, and primary metals all experienced significant setbacks. The motor vehicle sector registered a particularly steep drop of 3.6%, underscoring the vulnerability of this key industry.

Economic Fallout and Central Bank Dilemma

Stephen T. Murphy, Senior Economist at Toronto Dominion Bank, characterized the latest figures as "just one more sign that the Canadian economy is slowing down and is increasingly at risk of recession." He attributes this weakness to a softening global economy, significantly impacting Canadian exports. This global slowdown is particularly impactful considering the United States remains Canada's largest trading partner.

This data presents a complex challenge for the Bank of Canada. The central bank has aggressively raised interest rates over the past year and a half in an effort to curb inflation and cool the economy. While inflation has receded from its peak, it stubbornly remains above the Bank's 2% target. The current interest rate of 5% is already impacting economic activity, and the latest manufacturing data suggests the effects are intensifying. The next policy meeting is widely expected to see the bank hold its key rate steady.

Royce Mendes, Head of Canadian Economics at RBC, highlights the precarious situation: "The weakness in manufacturing sales is a challenge for the Bank of Canada. They've been trying to rein in inflation, but this data suggests that the economy is starting to feel the pain more significantly." The central bank now finds itself caught between the need to control inflation and the risk of triggering a recession.

Durable vs. Non-Durable Goods & Future Expectations

The sales decline wasn't uniform across all goods categories. Durable goods, those expected to last longer than three years, saw a more substantial drop of 1.2%. Conversely, sales of non-durable goods, with a shorter lifespan, experienced a modest increase of 0.5%. This divergence could indicate shifting consumer behavior or supply chain disruptions affecting different product types.

The broader economic narrative points to weaker global demand as the primary driver of the manufacturing slump. Slower domestic growth, coupled with the accumulated effects of higher interest rates, are further contributing to the negative trend. The current climate also suggests a diminished expectation of future interest rate hikes by the Bank of Canada. Market speculation of a potential rate increase has largely evaporated in light of this latest data.

Looking Ahead: Potential Recessionary Impact & Policy Responses

The consistent decline in manufacturing sales paints a worrying picture for the Canadian economy. While a recession isn't inevitable, the risk has significantly increased. Economists are closely monitoring a range of indicators, including consumer spending, employment figures, and housing market activity, to assess the overall health of the economy. Further data releases in the coming weeks will be critical in determining the trajectory of the Canadian economy and informing the Bank of Canada's policy decisions. Government interventions, or a change in the global economic climate, could potentially alter the current course, but for now, a period of economic slowdown appears increasingly likely.