Canada's critical automotive sector experienced a severe contraction in November, with factory sales plunging to their lowest point in three years. The dramatic downturn was driven by a persistent global shortage of semiconductors, softening consumer demand, and escalating trade tensions with the United States.
Sharp Decline in Manufacturing and Wholesale
The latest data from Statistics Canada, released on Thursday, January 15, 2026, paints a stark picture for the industry. Manufacturing sales for motor vehicles and parts plummeted by 15.9% in November. This marked the second consecutive month of decline, dragging the sector to its weakest performance since October 2022.
The pain extended to wholesale trade, where receipts for motor vehicles and parts fell by 11.5%, also reaching a low not seen since late 2022. This dual slump in factory and wholesale activity was a primary drag on the broader goods-producing economy. Overall manufacturing sales fell 1.2% for the month, while wholesale trade declined by 1.8%.
Multiple Headwinds Cripple Production
Statistics Canada pinpointed several converging factors behind the collapse. A major assembly plant faced significant production disruptions directly tied to the ongoing global semiconductor shortage. This supply chain crisis compounded existing challenges, including:
- Weaker consumer demand for new vehicles.
- Mounting pressure from U.S. trade policies under President Donald Trump's administration, which have led to increased tariffs and uncertainty.
The poor results surprised economists, who had anticipated a smaller 1.1% drop in factory sales and a modest 0.1% gain in wholesale trade, according to a Bloomberg survey.
Broader Economic Implications
The dismal auto sector performance signals fading economic momentum as 2025 drew to a close, pointing toward a slow final quarter for Canadian economic growth. Benjamin Reitzes, rates and macro strategist at Bank of Montreal, characterized the data as a continuation of a "mediocre trend" for the Canadian economy over the past year.
In an emailed analysis, Reitzes suggested that the persistent trade uncertainty would likely result in uneven growth and should "silence any chatter of Bank of Canada hikes for now." The central bank has previously indicated its policy rate of 2.25% is appropriate, contingent on inflation and output evolving as forecasted.
The November figures underscore how external shocks—from global supply chain breakdowns to protectionist trade measures—continue to expose vulnerabilities in Canada's integrated manufacturing base, with the auto industry bearing a significant brunt of the impact.
